The $20 million deposit will earn a market interest rate of return. Any earnings above that will be used to form a pool of money to help the PCUA and credit unions market the Better Choice program to consumers, as well as provide a loan-loss reimbursement pool for up to 50% of any loan losses from the program.

Wishnow pointed out the $20 million deposit marks the first time state Treasurer Robert Casey's office is making a deposit in the credit union system.

Casey applauded the PCUA for its commitment to developing the Better Choice program, and he noted this is the first program in the U.S. to offer a statewide alternative to payday lending.

"Payday lenders prey on desperate families and cost those who are already struggling to make ends meet billions of dollars per year in fees," said Casey. "Our Better Choice program gives working people a real alternative to borrowing against their next paycheck. With lower costs, extended installment payments, financial counseling and a savings boost, Better Choice helps families make ends meet without devastating their budgets."

Better Choice loans offer consumers a 90-day, $500 or less installment loan at an 18% or less rate, with a $25 application fee regardless of the loan size. There is also a savings component to the program to help borrowers build wealth. An amount equal to 10% of the loan is deposited in a savings account in the borrower's name. Interest accrues on the account, and any interest paid on the additional 10% is rebated to the borrower when they pay off the loan.

Unlike traditional predatory payday loans, a Better Choice loan must be paid in full before a borrower can take out another loan, so borrowers are prevented from getting caught in the cycle of rolling over a loan on its due date and paying exorbitant fees for the privilege.

No credit check is required for the loan, and the borrower does not have to provide a post-dated check as security for the loan's eventual repayment. Loan payments can be made in weekly, bi-weekly, or monthly installments.

So far, 37 credit unions with 129 locations statewide, have committed to the Better Choice program.

PCUA President/CEO Jim McCormack said it was "appalling" what payday lenders charge consumers to borrow money.

"Payday lenders target those most vulnerable and use astronomical fees to gouge consumers and to trap them in debt. With so many families living paycheck to paycheck, I am pleased that once again credit unions have united to support working Pennsylvanians, something we've consistently done in Pennsylvania since 1934."

The Filene Research Institute recently estimated credit unions' loan losses for their alternative payday loan programs are between 5-7%, and Wishnow said the PCUA is hopeful that the way the Better Choice loans are priced will be a break-even for participating credit unions.

The state Treasurer said Pennsylvania's credit unions have once again proven their strong commitment to meeting the needs of their members and their communities. –[email protected]