Microfinance in the U.S. Providing access to non-Predatory Financial Institutions via Community Development Credit Unions Jeremiah Tillman & Ron Chin May 28 th , 2009 IgniteChi.org

Providing access to non-Predatory Financial Institutions

via

Community Development Credit Unions

Predatory financial institutions IgniteChi.org

How Do Payday Loans Work? Unsecured loan on a future check Typical interest rate of 15% for a 2 week period Many customers carry a balance IgniteChi.org

Unsecured loan on a future check

Typical interest rate of 15%

for a 2 week period

Many customers carry a balance

How Do Payday Loans Work? Implications? Annualized interest rates (EAR): Mortgage ~ 5-7% Student Loans ~ 7-8% Credit Cards ~ 10-20% Payday Loans ~ >3500% Many customers carry a balance… EAR: Effective Annual Rate, takes into account compounding Source: www.bankrate.com, www.en.wikipedia.org/wiki/Payday_loan IgniteChi.org

Implications?

Annualized interest rates (EAR):

Mortgage ~ 5-7%

Student Loans ~ 7-8%

Credit Cards ~ 10-20%

Payday Loans ~ >3500%

Many customers carry a balance…

How Do Payday Loans Work? Many customers carry a balance… How much would a $100 loan cost to pay back at the end of 1 year? IgniteChi.org

Many customers carry a balance…

How much would a $100 loan cost to pay back at the end of 1 year?

How Do Payday Loans Work? IgniteChi.org

How Do Payday Loans Work? IgniteChi.org

Who Uses Payday Loans? Younger consumers with limited understanding of finances Consumers who are deeply in debt Consumers who are struggling to meet their day-to-day financial obligations Those who have a history of using high-risk lenders IgniteChi.org

Younger consumers with limited understanding of finances

Consumers who are deeply in debt

Consumers who are struggling to meet their day-to-day financial obligations

Those who have a history of using high-risk lenders

Impact on community Payday loans are extremely expensive. Don’t help you solve the problem at hand. Can have drastic effects on credit scores. IgniteChi.org

Payday loans are extremely expensive.

Don’t help you solve the problem at hand.

Can have drastic effects on credit scores.

What can be done? IgniteChi.org

Asset Based Community Development – Credit Unions IgniteChi.org

Who Owns a Credit Union? IgniteChi.org

Who Runs a Credit union? IgniteChi.org

What Products do Credit Unions Offer? Health Savings Accounts Home Equity Loans Home Loans Identity-Fraud Protection Internet Banking IRAs Line of Credit IgniteChi.org

Health Savings Accounts

Home Equity Loans

Home Loans

Identity-Fraud Protection

Internet Banking

IRAs

Line of Credit

What Products do Credit Unions Offer? Line of Credit Local Advantage Privacy Policy Refinancing Safe Deposit Box Savings Trusts IgniteChi.org

Line of Credit

Local Advantage

Privacy Policy

Refinancing

Safe Deposit Box

Savings

Trusts

What Products do Credit Unions Offer? Business Banking Checking Accounts Club Accounts Debit-Credit Cards Deposit Insurance Direct Deposit Education Loans IgniteChi.org

Business Banking

Checking Accounts

Club Accounts

Debit-Credit Cards

Deposit Insurance

Direct Deposit

Education Loans

How Competitive are Credit Unions? Very Competitive IgniteChi.org

Is Your Money Safe at a Credit Union? IgniteChi.org

In Conclusion… Community Development Credit Unions www.cdcu.coop IgniteChi.org