According to an article in the Star-Telegram, eight credit unions in North Texas plan to compete directly with payday lenders by providing short-term loans to the low-income community who depend on payday loans. Credit Unions are developing a pilot program to entice low-income consumers of payday loans to join a credit union and take out short-term loans from the credit union instead.
The article said:
"We are in the very early stages of development, but what we do know is that the interest rate will be capped at 18 percent," said Linda Webb-Mañon, a spokeswoman for the Dallas-based Texas Credit Union League. "That is the max. And when you consider what consumers pay at predatory lenders, it's a good deal."
Currently, 90 percent of consumers who use payday loans pay interest rates between 300 and 400 percent. Fifteen states and the District of Columbia have capped payday loan interest rates at 36 percent. Texas failed to pass a law restricting payday loan interest rates, leaving many Texan payday loan customers paying $15 for every $100 borrowed, which works out to an annual interest rate of 391 percent.
On the surface, the credit union effort to siphon off payday loan borrowers seems beneficial to consumers; but 36 percent interest is still well below prime rates offered to prime customers. Consumers should be cautious about high interest credit especially payday loans because once they fail to repay them the debt can cause a domino effect leading to all types of financial chaos. Many payday loan borrowers have even lost their homes to foreclosure because of delinquent payday loans.
Payday loans can be discharged in bankruptcy. If you are inundated with consumer debts, including payday loans, contact a Dallas-Fort Worth bankruptcy attorney to find out how you can discharge your debts.