Payday lending enters a new frontier

Payday lending enters a new frontier. Jamie Fulmer, vice president of public affairs Those public information, command information, and community relations activities directed toward both the external and internal publics with interest in the Department of Defense. Also called PA. See also command information; community relations; public information. for payday lender Advance America, says he welcomes the opportunity to work with the  Consumer Financial Protection Bureau, because consistent disclosures  would allow his product to be measured by the same metrics as competing  short-term credit union loans. While Fulmer admitted credit unions typically charge a lower annual percentage rate for their short-term credit products, he said the  cooperatives often also charge application fees that drive up the total  cost as high as, or even higher than what Advance America charges. "It's easy to criticize a product on its face, but this is where I think the bureau can help," Fulmer said. "To make sure that you are comparing products on an apples-to-apples basis,  because that's where the real rubber meets the road. If our product  is more expensive, the consumer ought to know that, but if we are being  measured using different metrics, it's misleading." [ILLUSTRATION OMITTED]    Concerned that consumers in need of short-term financing were being  denied by traditional financial institutions - including credit unions -  the financial cooperatives began offering payday loans. At first, CUSOs like Credit Union Outreach Solutions Inc. introduced payday lending,  providing expertise in the way of disclosures and underwriting  standards, and in CUOSI's case, setting up a fund to cover  defaults. However, as payday lending has evolved into a mainstream product, more credit unions are choosing to provide their own in-house  payday lending solutions; so much so, that CUOSI said it will  discontinue dis·con·tin·ue    v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues   v.tr. 1. To stop doing or providing something; end or abandon:   operations next year. Ultimately, Fulmer said consumers don't care whether they're being charged APR APR   See: Annual Percentage Rate  or fees; instead, they care about  "how much they have to reach into their pocket to pay for one  option over another." Of course, that depends upon how many times the consumer reaches into his or her pocket. Bill Burke, president/CEO of the $260 million Day Air Credit Union, said his research has shown  that if a borrower doesn't turn over a payday loan A payday loan or paycheck advance is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. Typical loans are between $100 and $1500, on a two-week term and have interest rates in the range of 390 percent to 900 percent, Fulmer's claim may have some validity. Burke is chairman of CUOSI which offers payday alternative Stretch Pay loans with nearly 50 credit union  partners. [ILLUSTRATION OMITTED]    "All of our analysis has shown that our financial model of  Stretch Pay has resulted in incredible savings compared to a typical  pay-day lender's model based on $15 for every $100 borrowed, said  the CEO 1 Chief Executive Officer The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board.  of the Dayton, Ohio-based Day Air CU. "I can't believe  that a payday lender would have a financial model superior to that of  credit unions from a cost of credit comparison."     Burke also said the CFPB CFPB Certified Financial Planner Board  has its work cut out for it because it  will be difficult to develop an apples-to-apples comparison for payday  lending products due to the ability to roll over the loans.     Credit union lending options may be the best for many consumers but  there cost or disclosures may not be as important. For example, a consumer may not want to fulfill a credit union's membership  requirement in order to gain access to a short term loan. Access to credit is another factor. Burke said he originally began developing Stretch Pay after attending a city council meeting in Dayton more than  10 years ago, when a council member was attempting to regulate payday  lenders within city limits. Burke was shocked to hear so many people speak out in favor of payday lenders, saying they were their only source  of credit. "One person after another would say, 'the payday lenders are all we have, because when we go to the bank, they put us through  hoops and then turn us down anyway,'" Burke said. A city council member asked the audience about credit unions, and Burke said he was shaken to hear that credit unions were also turning  down those who needed short-term credit. "I thought, 'gosh what can we do, because I didn't like to hear that,'" Burke said. "What a horrible perception for credit unions, and that's why we developed a payday  lending alternative." Find out more on wage day advance