While the Payday Pundit agrees that having more choices is a good thing for consumers, we do think all lenders should have to follow the same rules.  GoodMoney charges a fee of $9.90 per $100 for their payday loan (252% APR).  How can GoodMoney be legal in Oregon and Ohio and other states that have instituted double-digit rate caps on payday loans? 

Well…by law, federally chartered credit unions cannot charge more than 18 percent APR. BUT, unlike payday lenders, credit unions do not have to include fees in their APR calculation.

CU Rolling Out Payday Lending Alternative Nationwide

By David Morrison

November 17, 2008

APPLETON, Wis. — The $145 million Prospera Credit Union has begun to offer the model for its successful payday alternative lending program to other credit unions nationwide.

Prospera has partnered with Goodwill Industries of North Central Wisconsin to offer GoodMoney, an alternative to payday loans at Goodwill store locations, which also provide check cashing and wire transfers at affordable rates. From its first location that opened in 2005, the program has grown to five locations.

So far, two other credit unions, Superior Choice Credit Union, Superior, Wis., and Delta County Credit Union in Escanaba, Mich., have also started to GoodMoney programs with Goodwill organizations in their areas.

“GoodMoney provides lower cost alternatives to consumers looking for a short-term loan. More importantly, the program encourages financial education, creating a more informed borrower, and access to other financial products to increase their financial stability,” said Lois Kitsch, national program director for the National Credit Union Foundation’s REAL Solutions program.

The National Credit Union Foundation gave Prospera credit union $75,000 in 2006 to help the CU further develop and promote the program.

As a reminder to the reporter, the GoodMoney payday loan (offered by a non-profit, tax-exempt credit union), comes with a fee of almost $10 per $100 borrowed (i.e., 252% APR).  For-profit payday lenders typically charge $15 per $100 borrowed while also paying taxes, employee salaries and health care, rent and overhead costs.  The $5 more they need to break even, pay taxes, make a profit and keep their businesses running makes sense for borrowers, employees and the tax coffers. 

Calling GoodMoney an alternative is fair.  But a solution?

http://www.duluthnewstribune.com/event/article/id/78237/

Goodwill, a non-profit, tax-exempt charity, in partnership with Prospera Credit Union charges customers almost $10 per $100 borrowed (i.e., 252% APR) for their “Good Money” payday loan. For-profit payday lenders typically charge $15 per $100 borrowed while also paying taxes, employee salaries and health care, rent and overhead costs. The $5 more they need to break even, pay taxes, make a profit and keep their businesses running makes sense for borrowers, employees and the tax coffers.

Even though Prospera/Goodwill is only trying to break even, they could not offer the product under the 36% annual rate cap being pushed by the Center for Responsible Lending.