Page 7 - MCUL: 2020 CU Impact Report
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SPRING 2020 CREDIT UNION IMPACT REPORT 7
ALTERNATIVES
TO PAYDAY LENDING
Photo Courtesy: One Detroit Credit Union
One of Michigan credit unions’ primary goals over the predatory stores is built to create the kind of debt
past few years has been actively working to protect cycle many customers fall into, My Pay Today allows
consumers against the rapid increase of payday borrowers to pay off the loan over a 60-day period to
lenders. These quick and accessible but predatory, help break the cycle.
high-interest loans put vulnerable customers in cycles
of debt that can be hard to escape. “What made this product unique is that we started
with a community need, didn’t allow ourselves
A recent study reported that Michigan is host to to be intimidated by the challenges, and devised
nearly 600 payday stores, which offer loans that often something that works,” said McDad.
carry interest rates exceeding 400%. And, once the
loan is paid off, statistics show that 70% of Michigan One of the many other Michigan credit unions that
consumers are likely to take on another loan that has created a similar product is the Hastings-based
same day, with nearly all borrowers returning within Thornapple Credit Union. Its product, the Mulligan
two months. Loan, is appropriately named for the golfing rule
that gives players a second chance. This loan has a
“We were determined to find a better answer for maximum amount of $750, with an 18% interest rate
this clear need in our community,” said Joumana and allows borrowers six months to repay.
McDad, chief strategy & innovation officer of One
Detroit Credit Union, which has developed a payday State-chartered credit unions in Michigan are
loan alternative for members. “One Detroit Credit able to offer payday loans at the same rates and
Union is helping working Detroiters finally break free fees as predatory lenders, but they choose to lend
from the risky cycle of payday loans by offering fair, responsibly instead, often offering supplemental
credible and reasonably priced alternatives.” counseling and guidance with the loan.
One Detroit’s loan product, My Pay Today, has an There is clearly a consumer need for payday loans,
annual fee and allows members to take draws of and the credit union movement is committed to
$500 at 18% as needed throughout the year. This helping members get their financial needs met in
results in an average cost of $14.60 per draw, as a way that properly assists them, rather than taking
opposed to the $65 rate of payday lenders. Further, advantage of them.
while the two-week period allowed by those
