Credit unions need to do more to find ways to provide more small loans, and to create alternatives for people who might turn to more predatory lenders, like those in the pension factoring field, says the author of an article that appeared in a recent Credit Union Journal.
Jim Jerving authored an article entitled Why CUs Need To Find More Ways To Just Say Yes To More Small Loans, appearing in the September 23rd edition of Credit Union Journal. Said Jervis:
‘A rose is a rose is a rose’ wrote Gertrude Stein a century ago, but when is a loan not a loan? An account in the April 28 edition of New York Times begs the question and illustrates both the confusion and predatory approach that new lenders sometimes take. A retired military veteran took a ‘pension advance’ from Pensions, Annuities & Settlements of $10,000 for monthly payments of $353 over 60 months for a total cost of $21,180 – an interest rate of 36.4% APR.
The pension advance firms say their products are not loans but advances, terminology which serves to evade state usury laws. The ‘advances’ target military veterans with pensions, an age group that is increasingly debt ridden. For households led by those 65 years and older, median debt has risen more than 50% from $12,000 to $26,000 in 2011, according to the Fed.
Credit unions used to do more unsecured loans that competed with suppliers like the pension advance loans.
Jervis says there are opportunities, some of which are available due to advances in technology, for credit unions to offer more small, unsecured loans. The article is available here.