Some Nevada credit unions offer payday loans, but most avoid short-term lending

The CEO of one of the largest credit unions in Nevada expressed concern Wednesday about his members’ use of payday loans but said short-term loans offered through his credit union came with cheaper rates and better service than those offered through storefronts or online.

Brad Beal, president and CEO of the 75,293-member One Nevada Credit Union, said the credit union re-entered the payday loan business last year with the launch of Advance Pay.

“It has been very well received,” he said. “We issue several hundred loans a month.”

Beal declined to disclose the total number of loans issued. He cautioned consumers that payday loans are a “very expensive way to borrow money.”

“We don’t recommend it,” he said. “If a member is using it elsewhere, it’s our obligation to offer it at a lower cost.”

Through Advance Pay, One Nevada offers as much as $1,000, for up to two weeks, for a $100 fee, compared with $170 charged by other payday lenders.

The issue of credit unions and payday loans has come under increased scrutiny recently by consumer advocates. The National Consumer Law Center and the Center for Responsible Lending in a letter to National Credit Union Administration Chairman Debbie Matz highlighted nine credit unions in five states that continue to offer members payday loans with triple-digit interest rates.

No credit unions in Nevada made the list. The nine credit unions were in Alabama, California, Florida, Louisiana and Oregon.

The letter noted that 52 of 58 credit unions identified by the NCLC in 2010 have left the payday business.

“But a few persist, and others have entered the business,” the letter stated.

Loans from credit unions are currently capped at 18 percent, but some qualifying short-term loans can go as high as 28 percent, plus a $20 fee. These numbers are still far below the standard three-digit annual percentage rates offered with most payday loans.

“Most credit unions are working to get their members out of payday loans, not to put their members into them,” said Lauren Sanders, managing attorney of NCLC’s Washington, D.C. office, in a statement. “But nine federal credit unions, and some state credit unions, still offer dangerous short-term loans at rates approaching 300 percent.”

The largest of these is Kinecta Federal Credit Union in Manhattan Beach, Calif., which offers loans at the stores of its Nix Check Cashing subsidiary. The NCLC says the credit union has been advertising 14-day loans with a 15 percent APR, which also charge a $32 fee. When the fee is added in, the effective annual percentage rate on the loan jumps to 223 percent.

Beal wasn’t familiar with the specifics of the letter, but said generally you can’t regulate or legislate away the payday business.

“If people want it, they’ll find it,” Beal said. “I wish we had zero demand for it.”

Beal acknowledged that short-term loans are not perfect or preferred. He said One Nevada offers its members financial counseling and opportunities in same cases to put loans on a monthly payment schedule.

“We don’t want to trap anybody into a cycle of debt,” he said.

As the NCLC noted, federal bank regulators recently began considering ways to further rein in predatory lending by federally insured and chartered banks. The NCUA has previously advised its member institutions of the problems involved with offering payday loans.

“We talked about it, but I don’t like the concept,” said Wayne Tew, president and CEO of the 32,930-member Clark County Credit Union.

Tew said when credit unions issue short-term loans the terms are more favorable than those members would receive from a typical payday lender. He said “there is a place for it,” but “it is sad” that there are so many in the community that have to turn to it.

Silver State Schools Credit Union doesn’t offer payday loans to its 56,659 members, while America First Credit Union, with 607,493 members and 10 branches in Southern Nevada offered a payday product from 2007 to 2010.

“I got too many other fish in the pond that are tastier than those,” said Steve VanSicker, chief credit officer with Silver State Schools Credit Union.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893. Follow @sierotyfeatures on Twitter.