Credit Unions Lead, Banks Need Coaxing in Payday Alternatives

Public Radio's Marketplace reports credit unions are trying to help ween people from the perils of payday loans, while reluctant banks need additional coaxing. Read:

Faith Community United is one of a small but growing number of credit unions trying to give payday lenders some competition. Now the FDIC wants more banks to jump in to the race. The FDIC's Bob Mooney says that's why the federal agency released guidelines earlier this summer for the type of payday loan they'd like banks to offer: Small, one-month loans capped at a 36 percent annual percentage rate.

Meanwhile, the bank regulator, the Federal Deposit Insurance Corp. (FDIC) is encouraging banks that it supervises to offer affordable small dollar loans to these customers.

To entice banks, the FDIC is offering extra credit at exam time. Every year banks have to show they are trying to meet the federal Community Reinvestment Act by doing business in the rich and poor parts of their neighborhoods. Banks that offer small dollar loans that follow the guidelines will get "very favorable" consideration in their annual reviews.

I guess we can't blame the banks for not looking out for the little guy. Unlike credit unions, it's not a natural bank tendency for the for-profit fellows.

Another stark contrast between banks and credit unions.

Read (and listen) to the complete segment on the Marketplace website.