Religious coalition targets quick loans at Utah credit unions, compares them to payday loans

Coalition targets quick loans at credit unions

SALT LAKE CITY — A Utah coalition of religious groups wants credit unions to stop offering short-term loans that they say can mean long-term debts for customers who use them.

The Coalition of Religious Communities says the quick loans are too much like payday loans and have similar pitfalls, such as high interest rates and unrealistic repayment deadlines.

“I thought credit unions were so you’d have fair stuff for people, both sides,” said Dorothy Talbert, a coalition volunteer from Salt Lake City. “They’re supposed to be nonprofit. Money shouldn’t be holier than people.”

The group cited a report from the National Consumer Law Center, customers who use the loans generally have about two weeks to pay back the money plus a set fee. But if they’re still strapped for cash when the loan is due, they may have to take out another loan and start paying high interest rates.

The law center urges financial institutions to lend with a maximum rate of 36 percent, including fees, and to allow either one month per $100 borrowed or six months for repayment.

Scott Simpson of the Utah League of Credit Unions said short-term loans offered at local credit unions come at half the rates of payday lenders. He said the credit union short-term loans also come with credit counseling and a savings plan, and they are given only to people whose credit is so poor that they do not qualify for other kinds of credit.

“There’s this motion about lending being made from the perspective of the borrower and not the lender,” Simpson said. “When you extend credit, it comes at some cost.”

Simpson said if credit unions stop making these loans, customers who want and need fast access to cash will be driven back to payday lenders.

Information from: Deseret News, www.deseretnews.com