SALEM, Ore. – With prodding by the state's Democratic governor and the chief credit union regulator, Oregon CUs – especially community charters – are feeling renewed heat this month to offer their members payday loan alternative products. In what some see as a quid pro quo tactic to tacitly force a greater number of product offerings, Floyd Lanter, administrator of the Oregon Division of Finance and Corporate Securities, said the agency "retains the authority" under its administrative rules to ask CUs seeking to branch or expand under community charters to offer payday lending-like products. Since Gov. Ted Kunlongoski first signaled last spring the state's alarm over the proliferation of payday shops and ordered a "policy review" of industry practices and regulation, Lanter's office in letters and meetings with leadership of the Credit Union Association of Oregon made it clear that CUs, as non profits, are ideal institutions to provide payday alternatives. So far a number of CUs, including many of the state's largest, have told the agency they already offer payday-like products or are making plans now to offer them in 2004. The latest to do so, the $315 million Rivermark Community CU in Beaverton last month introduced the "PayDay Advance Loan" with an 18% APR on a $500 loan balance, noting that on the first day that Rivermark introduced the product on its Web site, "it received 10 requests." Rivermark, which said it had no delusions PayDay Advance would be "a money maker for us," was particularly proud of an Oct. 8 letter from Gov. Kunlongoski praising the CU for "keeping with the spirit of your community charter." A similar letter from the Oregon governor was sent to Portland Teachers CU for a PayDay Advantage Loan with the state's chief executive lauding PTCU for "putting together a thoughtful alternative that will provide great service to your extensive membership." Meanwhile, the $164 million Southern Oregon CU in Grants Pass said that in response to a request from Lanter's office, it agreed to lower loan minimums from $300 to $100 as part of a deal to switch from a federal charter made effective last month. "We were asked if we could change our minimum and we saw no problem doing that," said Charla Zeltvay, president and CEO, in discussing the state's policy of asking Oregon CUs to do more for low-income clientele. She said her community of 30,000, once a large timber products center, is now home to retirees "and many low-income individuals with low paying jobs" in service industries and tourism so she said she understands the state's attempt to provide relief as it curbs predatory payday outlets. Her chief goal in switching from a federal to state charter, she said, was part of a "growth strategy" involving mergers, including one pending with Highland Community CU of Klamath Falls. Lanter told Credit Union Times his agency believes that CUs with community charters "who want to serve existing members or want to build membership" need to show commitment "in their business plans" on exactly how they will provide services to the low-income segment. "As a credit union, you have a statement of purpose that says you are not profit and that means you are all about service," said Lanter stressing that he is not asking CUs to go broke offering such products because CUs have to "maintain capital" at satisfactory standards. He said he does not expect a payday lending alternative product to be "a loss leader" but it can be a vehicle "to enhance and strengthen membership." The Oregon regulator said because of their profit motive, banks are in a slightly different position than CUs in extending these kinds of loans and yet he recalls recent remarks of Massachusetts Commissioner of Banks Thomas J. Curry, a member of the FDIC Board, urging banks to shoulder a larger share of payday loans. As he did in September in letters to Oregon CEOs, Lanter, a former FDIC bank examiner before taking the CU regulator's job three years ago, repeated the state's concern over the growth of payday shops, noting they are the "fastest growing" industry and "now there are more payday lenders than McDonald's." Paul Williams, chairman of the Credit Union Association of Oregon and president/CEO of Clackamas Community FCU in Oregon City, said his CU "is looking at a payday product but we don't have one now" adding that such an offering falls under risk-based lending and that is an area requiring thorough financial education. The CU has to beef up education seminars and training "before you can roll it out," he said, adding Clackamas is currently working on such a project. However, while agreeing with Lanter on encouraging payday products "as a very good step", Williams took issue with the regulator's attempts to enforce it. "I don't think it is appropriate to require a credit union to offer" such a product he said. "What's next-requiring them to offer first mortgages?" Williams said every CU "has to figure out what his or her membership needs and what it can properly provide" and on that score also has to be realistic asking a practical business decision, "Can we offer this product and at least break even?" Since it began offering "PayDay Advantage" Sept. 13, Portland Teachers said it has made 49 loans with the average at $282.PTCU members can borrow up to 20% of their next paycheck, with a maximum of $600 per loan. Full payment of the loan and interest is due five days after the member's next payday. PTCU charges no loan application fee with a 12% rate for members with automatic payment and 14% for members without automatic payment. The $1.5 billion First Tech CU in Beaverton, the state's largest, said its "Salary Advance" product now has 300 loans on the books since July 1 and represents "good business" for the CU underscoring "our social responsibilities," said Thomas Sargent, president/CEO. Scott Burgess, president/CEO of Rivermark, said his CU is fulfilling its responsibility to members and the communities "we serve to provide an alternative to payday leaders and "lender abuses." "We feel it is imperative to also assist those who need to regain control of their finances," said Burgess noting the CU has signed on with Balance, a firm offering free and confidential assistance to borrowers. -

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