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In a financial pinch? Credit union CEO educates consumers on alternatives to traditional payday lenders and apps for emergency cash relief
On-demand cash payments, with affordable fees, now available through traditional financial institutions
Media Contact: Barbara Fornasiero; EAFocus Communications; barbara@eafocus.com ; 248.260.8466
Wyandotte, Mich. — November 22, 2021 — It has never been easier for consumers to access their money through payday lending services and the instant money apps that have proliferated since the pandemic; however, many are unaware of the costs associated in using these types of services and how quickly they add up. Carma Peters, President and CEO of Michigan Legacy Credit Union (MLCU), sheds light on the inflated fees that payday lenders and digital cash-advance services charge for their offerings—penalizing the individuals who are most in need of the cash but can least afford the fees.
“I’ve always been unsettled by consumers wasting their money on additional fees to get their paychecks cashed or to get short-term loans to tide them over until payday,” Peters said. “At first glance, payday lenders seem innocuous enough because they give consumers the quick cash they need with a few weeks to pay it back, but what isn’t apparent is the annual percentage rate equivalent often surpasses 300%.”
Peters offers an example from Consumer Financial Protection Bureau data, which finds payday loan fees typically run $15 per $100 cash advance, in noting that an individual asking for a $300 loan would pay a $45 fee. That translates into an annual percentage rate (APR) of 400%—well over typical credit card APRs. Peters also notes that data from the Center for Responsible Lending indicates that states with fewer regulations and no rate caps, which includes Michigan, have borrowers that can fall into the “payday loan debt trap,” where they continually have to reborrow to cover their previous payday loan.
In addition to debt traps, Peters cites other risks and disadvantages from using third-party lending apps, including privacy concerns; overdrafts and the high fees associated with them; the inability to effectively build up credit, just like with short-term small-dollar lending services; and the lack of personalized service when there are questions and problems.
MLCU—known for finding unique and individualized financial solutions for its members—has a history of granting credit to borrowers with lower credit scores and offers an on-demand payroll advance option called ‘Pay Me Now,’ which was introduced in 2021 and provides money for short-term purposes with lower fees. The credit union also offers loans for members who may need a larger, longer-term option, with NO fees to obtain the loan. (Note: anyone who lives, works or attends school in Michigan is eligible to join MLCU.)
“Many consumers are unaware they can look to traditional financial institutions like credit unions and banks to receive the same on-demand cash at a lower interest rate or fee, saving hundreds of dollars annually.”
Peters said. “Not only can they improve their financial situation, they can get the personal financial assistance they need for their own well-being and establish an ongoing, trusting relationship with their lender.”
About Michigan Legacy Credit Union
Michigan Legacy Credit Union (MLCU) is a member-owned, not-for-profit financial cooperative serving members who live, work, worship, attend school, or own a business in the state of Michigan. Michigan Legacy Credit Union is committed to providing quality financial services at a competitive price, delivered professionally and efficiently while keeping member/owners and their needs first. For additional information on MLCU, visit: www.michiganlegacycu.org.
