A product of Credit Union Outreach Solutions, Inc.
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Transcript of A product of Credit Union Outreach Solutions, Inc.
A product of A product of Credit Union Outreach Solutions, Inc.Credit Union Outreach Solutions, Inc.
What is StretchPay?What is StretchPay?
A reasonable ‘payday lending’ alternative …
• Outreach … to those with greatest need
• Lower fees & interest rates
• Financial education & counseling
• Members rebuild credit, escape payday debt treadmill
Why StretchPay? Why Now?Why StretchPay? Why Now?
Ohio:
391% APR … payday lenders licensed in Ohio can charge borrowers (prior to June 2)
1,562 … payday lending shops368,000 … payday borrowers$200+ million … fees Ohioans pay annually to
payday lenders
Source: Ohio Coalition for Responsible Lending
StretchPay BenefitsStretchPay Benefits
… for your Credit Union:
A turnkey payday loan alternative at a low cost, without significant financial risk
An opportunity to educate members about budgeting and other personal financial management skills
Interest income at 18% with a minimum of credit riskShows your support of the community and your
members, particularly working people and those of modest means.
Who uses payday loans?Who uses payday loans?
66% … 45 years old or younger
62% … female$25,000 - $50,000 …
average household income20% … are credit union
members
Source: National Endowment for Financial Education, National Credit Union Foundation
Who uses payday loans?Who uses payday loans?
Most are … MarriedHave some college
education40% have children Take out an average of
12.6 loans annually
Source: Ohio Coalition for Responsible Lending
Turnkey Outreach Products1. StretchPay
CUOSICUOSI
A cooperative organization to fuel outreach and A cooperative organization to fuel outreach and community commitment initiatives, including community commitment initiatives, including
StretchPayStretchPay
Credit Union Outreach Solutions, Inc.
CUOSI Membership GrowthCUOSI Membership Growth
Data through June 30, 2008
46 credit unions – 46 credit unions – Ohio (35), Michigan (4), Ohio (35), Michigan (4), Maryland (2), Colorado Maryland (2), Colorado (1), Wisconsin (2), North (1), Wisconsin (2), North Carolina (1), Washington, Carolina (1), Washington, D.C. (1) and D.C. (1) and 3 Leagues – 3 Leagues – Ohio, Wisconsin, and Ohio, Wisconsin, and Maryland/DCMaryland/DC
Offered at 137 Branch Locations Offered at 137 Branch Locations NationwideNationwide
Asset Size of Participating Credit Unions*Asset Size of Participating Credit Unions*
*Data is based on the 46 credit unions and does not include the 3 participating leagues.
2008 CUOSI Board of Managers2008 CUOSI Board of Managers1. Bill Burke, DayAir CU, Chair2. Dick Maslyk, MidState Educators CU, Vice Chair3. Catherine Herring, Communicating Arts CU, Secretary/Treasurer4. Doug Fecher, Wright-Patt CU5. Tom Griffiths, Atomic Employees CU6. Dorothy Lester, First General CU (Michigan)7. Barry Shaner, Directions CU
Ex OfficioPaul Mercer, President, Ohio Credit Union LeagueBrett Thompson, President/CEO, Wisconsin Credit Union LeagueMike Beall, President, Maryland & DC Credit Union Association
StretchPay now in 5 states & D.C., Two more expectedColorado is the latest state to join the credit union salary advance alternative StretchPay, which was conceived and piloted in Ohio. A total of 40 credit unions in Ohio, Indiana, Maryland, Indiana, Maryland, Michigan, Colorado, and Washington, D.C. are offering StretchPay to their members, at 129 branch locations.
Payday loan business is booming Dayton, OH (3/19/08) … Ohio's credit unions offer a cheaper alternative to payday lenders under a program called StretchPay. The interest rate is 18 percent on 30-day loans of $250 or $500. …
Ohio credit unions banding together to offer payday loans, education
StretchPay covers consumers not served by banksWASHINGTON (7/14/06)--The payday-loan alternative offered by 11 Ohio credit unions is being noticed by the business trades. In Thursday's American Banker, the Consumer Federation of America weighed in on StretchPay as a "good alternative" to payday loans.
StretchPay DetailsStretchPay Details
Credit limits $250 ($35 annual fee)
$500 ($70 annual fee)
30-day term18% APR (or the max. permitted by applicable
law)
Re-paid in full prior to additional advancesPayroll deduction & financial education
encouraged, but not required
The Numbers*The Numbers* StretchPay advances (2007):
64,407 totaling $25 million
$3+ million … saved by StretchPay users in interest & fees
StretchPay loans per credit union: from 6 to 34,323 from $2,000 to almost $14 million
* Data is for calendar year 2007
Minimal Underwriting CriteriaMinimal Underwriting Criteria
An applicant must be …CU member for 60 daysNot delinquent on existing loans or negative in
any share account18 or olderHave verifiable incomeNot in the process of filing for bankruptcy
Reimbursement for Charge-off LoansReimbursement for Charge-off Loans
CUOSI minimizes credit union loan losses
Credit union has some exposure … to create risk-sharing and make reasonable efforts to collect losses
Up to 90% of loan losses may be reimbursed by CUOSI
Common QuestionsCommon QuestionsIs a credit union required to offer both the $250 and $500 lines of credit?
No. You may offer one or No. You may offer one or both.both.
Is there a minimum income requirement for a member to obtain a StretchPay loan?
No. But the member mustNo. But the member must verify that they have some verify that they have some income. income.
Common QuestionsCommon Questions
Are members required to have a checking account in order to obtain a StretchPay loan?
The program does not require it, The program does not require it, but every CU has the choice of but every CU has the choice of requiring one as part of its requiring one as part of its policies and procedures.policies and procedures.
Common QuestionsCommon Questions
Will our CU really be reimbursed for any StretchPay losses we experience?
You can apply to CUOSI for You can apply to CUOSI for reimbursement for up to 90% of the reimbursement for up to 90% of the principal loss. The $35/$70 paid by CU principal loss. The $35/$70 paid by CU members is forwarded to CUOSI and members is forwarded to CUOSI and deposited in a Loan Loss Reserve to be deposited in a Loan Loss Reserve to be used to defer losses incurred by CUs. used to defer losses incurred by CUs.
Common QuestionsCommon QuestionsHow do participating credit unions provide input about the operation of CUOSI, or the StretchPay product?
An Advisory Council comprised of An Advisory Council comprised of every StretchPay participant and every StretchPay participant and the participating leagues meet the participating leagues meet
regularly via conference callregularly via conference call. .
Common QuestionsCommon Questions
Is there a fee to join CUOSI?
Yes. CUs pay $25/$1,000,000 in Yes. CUs pay $25/$1,000,000 in assets per your most recent 5300 assets per your most recent 5300 Report (capped @ $15,000). Report (capped @ $15,000). Currently, this is a one-time fee.Currently, this is a one-time fee.
Common QuestionsCommon Questions
When can I begin offering StretchPay?
Once contracts have been executed Once contracts have been executed by your credit union and the by your credit union and the Chairman of CUOSI, and your Chairman of CUOSI, and your membership fee has been received, membership fee has been received, you can begin offering StretchPay to you can begin offering StretchPay to your members. your members.
www.OhioCreditUnions.org/StretchPay.htm
Quotes Quotes “Countless Ohioans are caught up in the payday
lending trap. We’re changing that. With StretchPay, we are sending people down the path of asset accumulation and better financial well-being, rather than the hand-to-mouth situation they currently find themselves in.
This segment of members can generate tremendous loyalty to the credit union. They will say, ‘I love my credit union. They helped me in my time of need.’”
- Bill Burke, CEO, DayAir Credit Union Chair, Credit Union Outreach Solutions,
Inc.
Quotes Quotes
“[Predatory lending] is an evil practice. Credit unions are working collaboratively to be part of the solution. It’s incumbent upon us to come to the aid of the consumer. If credit unions can’t solve this problem, no one can.”
- Doug Fecher, CEO, Wright-Patt Credit Union Member, CUOSI Board of Directors
QuotesQuotes
“[The StretchPay loan was] affordable and reasonable.… Trust is a real issue for me. We could trust the credit union a lot more.”
-Paulette Strolia-Davis, Member, DayAir CU
QuotesQuotes
“I was about to lose everything, totally everything. I went to a lot of financial institutions, and they turned me away. I feel like the credit union rescued me.”
- Ora Houston, Member, Wright-Patt CU
