Financial Literacy Key to Breaking Payday Lending Cycle, `Profitable' for CUs

NEW YORK- NCUA Chairman Dennis Dollar told attendees of the National Federation of Community Development Credit Unions’ Financial Literacy Conference, during his keynote address, that financial literacy programs should be a priority at all credit unions, especially in low-income communities. Credit unions can “provide the vital link between access to lower-cost financial services and the breaking of the vicious payday lending cycle in many low-income neighborhoods,” he said during the conference held at St. Mark’s Church and Federal Credit Union in Harlem. “Creative financial literacy programs are indispensable for credit unions seeking to make a positive long-term difference in many low-income communities,” Dollar said. “Providing an 18% payday loan is an attractive option that many credit unions are offering to residents of their communities that might otherwise only have the option of a payday or pawnshop loan at 180% or more. However, the advantages must be communicated in a manner that results in a financial lifestyle change or else personal convenience more than one’s financial self-interest will prevail.” Dollar applauded NFCDCU’s efforts to promote financial literacy programs in credit unions. The chairman also recommended that credit unions consider using the Federal Deposit Insurance Corporation’s Money Smart program, which NCUA has endorsed as part of Access Across America. “With good risk management practices coupled with an effective financial literacy program,” Dollar stated, “credit unions can make a difference for both these underserved neighborhoods and their credit union net worth. They can help break the cycle of payday borrowing for a lot of good folks who only need access to a lower cost alternative while strengthening their credit unions’ financial position at the same time. Financial literacy is the vital link that ties the two together successfully.”