The results of a new payday loan study by the University of California Graduate School of Management entitled, “Are Credit Unions Viable Providers of Short-Term Credit,” the study by professor Victor Stango suggest borrowers seeking small, non-collateralized, short-term loans prefer to pay higher rates for “small, short-term loans than to participate in credit union programs that have strings attached, such as a savings component or a financial education requirement.”
Additionally, credit unions find that consumers resist their products due to shorter operating hours and a payday loan type of product offered by credit unions can harm a consumers credit rating; something payday loan stores do not do.
Titled, “Are Credit Unions Viable Providers of Short-Term Credit,” the study by professor Victor Stango comes as credit unions are petitioning regulators to increase charges on payday loans. The National Credit Union Administration.
Read the full Study here.
For the consumer it is all about availability, convenience, and ease of access to cash. Price has very little to do with it.
Also, both banks and credit unions have been making payday loans for years, they just have been calling it Overdraft Privilege or Courtesy Pay. What else do you call a loan that you get by writing checks or using a debit card to make purchases or access cash that you do not have in your account, and that is paid back when you receive your next pay “check” through direct deposit?
Too bad the media and all the legislators who think they know what’s best for us can’t read this and overcome their prejudices!