SHORT-TERM HELP AT LITTLE RISK

Olympia, Wash. — Thinking about getting involved in payday lending but concerned about risk given the tough economy? One credit union that’s closing more than 2,000 such short-term loans each month says risk is not an issue as long as you have a tool to help you evaluate members’ credit.

The $1.3-billion Washington State Employees Credit Union watched its “Q-Cash” program grow from 100 a month four years ago to 2,000-2,300 today with only 2% delinquencies.

Heidi Tinsley, Q-Cash program manager, says it relies on Teletrack credit reporting for its payday decision-making.

“Teletrack decreases our losses because we have a subprime credit reporting agency providing us with valuable information to determine the status of potential borrowers,” Tinsley explained. “If we see a red flag, like a bankruptcy filing, we don’t make that loan. Our loss rates are minimal and what we pay Teletrack is insignificant.”

Teletrack pulls report information not only from public records, but also from data it receives from payday lenders who provide data on individuals taking payday loans.

While Teletrack protects the CU, what’s moving the product is favorable pricing and repayment terms.

“We structured our Q-Cash product to be one-third below market pricing–$10 per $100,” Tinsley said. “And we also offer a term up to 45 days and two repayments.”

The average balance of Q-Cash loans is $450, but that’s not the only benefit the CU sees.

“When members walk in for a payday loan it gives us the opportunity to discuss other financing avenues,” Tinsley said. “Numerous times members have come in for Q-Cash and walked out with a Visa credit card.”

Source: Credit Union Journal, http://www.cujournal.com, May 5, 2008