KITCHEN: NEW STATEWIDE LOAN PROGRAM A ‘BETTER CHOICE’ FOR FAMILIES

          HARRISBURG, November 16 - Families who need small, short-term loans and are looking for an alternative to predatory payday lenders can take advantage of a Better Choice, said state Sen. Shirley Kitchen.

          The statewide Better Choice loan program offers affordable, 90-day loans of up to $500 with a unique savings component equal to 10 percent of the loan amount.

           “This innovative program also protects borrowers from falling into the vicious trap of debt,” said Kitchen (D-Philadelphia). “Too often, payday lenders and their high fees prey on hard-working families who are just making ends meet.

          “A Better Choice provides a safe alternative with an option to actually save money,” she added.

           The program, which was developed by the Pennsylvania Credit Union Association in partnership with state Treasurer Robert Casey and with support from the Pennsylvania Department of Banking, is the first of its kind in the nation.

          Better Choice loans will be offered at 129 branches of 37 credit unions across the state, including American Heritage Federal Credit Union, Eagle One Federal Credit Union, Freedom Credit Union, Trouvaille Federal Credit Union and Transit Workers Federal Credit Union, with more to follow in coming weeks.

          Better Choice loans differ from predatory payday loans in a number of important ways:

• A Better Choice loan must be paid in full before a borrower can take out another loan. This prevents a borrower from getting caught in a never-ending cycle of rolling over a loan on its due date and paying exorbitant fees for the privilege.

• Better Choice customers will be loaned an additional 10 percent that will be deposited in an interest-bearing savings account in the borrower’s name.

• Credit unions will offer financial counseling to Better Choice customers to improve their fiscal literacy and help them make smart long-term financial decisions.

• The Better Choice loan application fee will not exceed $25, regardless of loan size. Payday lenders commonly charge as much as $25 per $100 borrowed.

• The interest rate charged on Better Choice loans will not exceed 18 percent.  Payday lending debt traps can lead to effective interest rates in excess of 500 percent.

• No credit check is required for a Better Choice loan.

• No collateral is required.  A Better Choice borrower does not have to provide a post-dated check as security for the loan’s eventual repayment.

• The 90-day loan repayment term is considerably longer than most payday loans, which require payment in full by the next paycheck.

• Loan payments can be made in weekly, bi-weekly, or monthly installments.

          For more information, visit the Pennsylvania Treasury Department Web site, www.patreasury.org