Credit Unions in Minnesota’s Arrowhead Region Work to Offer Payday Debt Solutions

ST. PAUL, MN (August 1, 2013) — Payday lending – typically small, short-term unsecured loans intended to bridge a cash flow shortage between paychecks – are a way of life for many Minnesota consumers. Whether individuals have an established account with a financial institution or not, many consumers view payday lending as a quick fix to an immediate problem.

Minnesota credit unions, such as Northern Communities Credit Union (NCCU) and Two Harbors Federal Credit Union (THFCU) are positioned to help consumers manage payday loan debt, while also offering alternatives to payday lending that allow their members to regain a financial foothold. These credit unions work within their communities to help provide solutions and educate their members while getting to the root of financial issues that can lead to seeking payday loans.

NCCU, with locations in Duluth and Virginia, Minn., puts financial education into practice. NCCU believes that member education – first and foremost – is the best line of defense for members facing financial challenges.

NCCU takes an overall member-centric ”seasons of life” approach when interacting with their members, according to President & CEO Larry Champeaux.

“Every interaction credit union staff has with members involves finding out what’s most important to the member today, whether that’s saving for a child’s college tuition or preparing for their own retirement,” Champeaux said. “Our credit union also makes financial counseling available to members, which helps them qualify to receive additional services and be better-prepared to properly budget and set up a long-term plan.”

Earlier this year, NCCU partnered with LSS Financial Counseling, a service offered through the Minnesota Credit Union Network, to help consumers avoid bankruptcy, foreclosure and debt settlement scams. Working with NCCU and LSS, members receive customized financial wellness plans that meet their unique needs.

THFCU also works closely with members to help them avoid the payday lending trap. Its new program, “Alternative to Predatory Lending” or APL, is used to assist members who would not normally qualify for an unsecured loan – due to credit, income or other factors – to assist them in an emergency.  APL applicants must be a credit union member for at least one month, and there is no application fee.  They may borrow a minimum of $200.00 and a maximum of $500.00 at 18% APR with a minimum loan term of one month and a maximum term of six months.

“We encourage the member to open a savings account at the time of the loan and encourage a small deposit be made to this savings account each month along with their loan payment (to promote savings for emergencies).  Once the loan is paid off we encourage them to continue to put the previous loan payment money into this account,” says THFCU Vice President of Lending, Darla Abrahamson.

A good example of APL in action involves a THFCU member who had a death in the family, needed money to fly south to attend the funeral and had no financial resources available for this emergency. THFCU was able to finance the plane ticket so the member could be with her family. The member successfully paid the money back and now has a small savings established with regular deposits to it.

As part of the lending process, the THFCU member also receives a brief financial review.  In the review the member learns about their credit score, how to balance their checkbook, how to set up a budget and also receives education on loans.  THFCU has partnered with GreenPath, a non-profit financial organization that assists consumers with credit card debt, housing debt and bankruptcy concerns.

All of the individualized attention credit unions provide can help their members break the cycle of payday lending.

The Minnesota Credit Union Network is an organization representing the state’s 133 not-for-profit cooperative credit unions serving more than 1.5 million member-owners in Minnesota. For more information, visit

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