Credit Unions More Than Able to Satisfy Pay Day Borrowers

Remarks by Payday Bank’s Ohad Hessel that “...we don’t think credit unions are capable of dealing with the risk involved in lending to customers with a high risk of defaulting payments.” has drawn further comment from Credit Union Solutions Chief Executive Officer Graham Tomlin who said.

“Payday Bank are being a little disingenuous, their operation operates by taking a portion of their client’s next payroll to satisfy a loan today.

If you compare that to a credit union that has payroll arrangements with an employer our service is far less costly and much more flexible than a Pay Day loan.

Firstly there is no charge for any of our loans to be repaid early so a member may take a loan for say 12 months and repay it in one or two months. Furthermore if they cannot repay all of their loan they can make additional payments to reduce the term to suit their needs. Since credit unions only charge interest on the outstanding balance of their loans their members are able to save huge amounts by comparison to other lenders.  

Secondly we offer our clients a line of credit such that they can draw down funds as and when they need them with transfers going from the credit union to the member in a matter of seconds.

If Pay Day lending serves such an important niche in the market how come they have been outlawed in most states in the USA? The fact is the UK is practically isolated as the only home for such horrendous lenders because we do not have usury laws or any other protection for the unwary borrower.

A loan of £400 from a Pay Day lender for six months rocketed up to nearly £800 whereas the same loan from a credit union would cost no more than £428 if that is not usury then perhaps a redefinition is required.

Employers should seek out their local credit unions and form a partnership to prevent their staff being duped because staff with money worries make very unproductive employees.”