Two Perspectives… maybe three.

Update 2-17-2008: A revised edition of this post appeared in the Danville Register & Bee opinion section today. Here is a link to that column.

You may have heard that in Virginia the General Assembly is considering putting a cap on the interest rates that can be charged by payday lenders in our commonwealth. There have been several articles about the subject to appear in our local paper, the Danville Register & Bee, as well as other places as well.

An Op-Ed article in The New Dominion magazine says that ads by payday lenders are misleading. It gives some very reasonable responses to the claims of payday lenders made in their advertising and lobbying.

The Register & Bee Opinion Section says that there are no alternatives to it in our area, and that if payday lenders are forced out of business, something will need to step up and fill the gap left by their absence.

I’d like to make a response to the idea that there are currently no alternatives to payday lenders in the Dan River Region. But first, here’s a question I’d like to throw out: What did people who depend on payday lenders do before there were payday lenders?

Now, there are alternatives to payday lending in our area. There are nine credit unions from Martinsville to Danville to South Boston. Of the two that I’ve worked for I can say with certainty that they have a strong desire to serve their members no matter how dire their financial situation might be. At my two credit unions personal loans are granted for as little as $500. True, that might be more than what some payday lending customers need, but what is not needed can simply be paid back on the loan the same day. I’ve never heard of a credit union charging an early-payment penalty. Perhaps a better alternative is to use that “extra” money to kick-start a savings account. Then divert a portion of the loan repayment towards adding to that savings account. This would help establish the habit of saving money which in turn will reduce the need to borrow in the future. The same small loan amounts also apply to vehicle loans. The two credit unions I’m intimately familiar with are not opposed to refinancing older vehicles if it is truly helpful to the borrower.

But, then there is the argument that not many people can join a credit union. This is just a lack of awareness. “I wonder if there’s a credit union I can join?” is not a question that the average person asks. The fact is that anyone from Martinsville to Danville to South Boston can join at least one credit union without having any family connections. When you consider the fact that a member’s immediate family can also join, it’s not far reaching to say that the average person in our community can join 2-3 credit unions. Without my employment connection I can join 5 locally. (That’s because I married a wonderful Danville gal!)

So why aren’t people asking that question, “I wonder if there’s a credit union I can join?” I believe it is because the general public thinks they are just like banks. But that’s just not the case. I once knew someone with 20+ years experience at a bank who came to work at a local credit union. This person was overwhelmed at the difference between the credit union and banking worlds. The idea that we’re here to do what’s best for the credit union member instead of what’s best for Trustees and Shareholders was a totally new concept. It’s like you really don’t understand it until you do it. The same is true for credit union members. They really don’t understand the difference until they experience it for themselves.

Finally here’s a Register & Bee Letter to the Editor which is from someone who depends on payday lending. It’s short so here it is in it’s entirety.

Support payday lending

To the editor:
In response to, “No rest for either side in payday lending debate,” (Dec. 30, page B5), I am praying the government will not close down the payday lenders in our city.
Without payday lenders, I don’t know what I would do. I have no insurance and I am a diabetic and I have to get loans from a payday lender in Danville to get help with my medications and my supplies.
If it wasn’t for them loaning me money until payday, I wouldn’t be able to feed my children or get the medical help that I need. I know there are some people out there that abuse these companies, but I am speaking for those of us who really need them because we can’t make ends meet on our small salaries and we can’t get help from the government agencies for medical supplies or food.
Please don’t close down the payday lenders.

MELISSA RIGNEY
Dry Fork

There definitely are legitimate points in this letter. Private insurance would be really expensive for a diabetic, and most small employers don’t offer health insurance. (Side note: I wonder what kind of employee benefits payday lenders offer?) There is that zone that many people fall into where they make too much for government assistance but their salary is not really enough to live comfortably. She’s probably a single parent too. Raising a family is hard, expensive work with two parents at home.

There are two things I’d like to know, three that I’m curious about. How did Melissa or people like her manage before payday lending became popular in our area? How much money in fees has Melissa has paid out to her payday lender? If she had half that money today what could it be used for? If Melissa reads this post I hope that she will contact one of the credit unions I’m about to list below. Perhaps they can help her get out of falling back on her payday lender and help her to get some savings started.

Here is a comprehensive list of credit unions in the Dan River Region along with who can join them. If you are stuck in that cycle of having to take out one payday loan after another, please look through this list and see if there is a credit union you can join. Remember to consider if anyone in your family can join one of them. If so then you could join through your family member.

• Piedmont Credit Union – That’s us, we serve the Educational Community and lots of local companies and businesses. You can see exactly which companies we serve here. We’re always looking to expand the list so let me know if you would like me to contact your employer about offering the benefit of a local credit union.
• Goodyear Danville Family CU – They serve anyone who works at the local Goodyear plant.
• Danville City Employees FCU – Any City of Danville employee may join. (434)799-5027
• Danville Regional Medical FCU – Any Danville hospital employee may join, as well as employees of other medical facilities which have started a relationship with the credit union.
• URW Community FCU – They started off serving the United Rubber Workers Local 831 Union at our local Goodyear plant. Now membership is open to anyone who lives or works in Danville, Pittsylvania County, and Caswell County, NC.
• Halifax County Community FCU – Anyone who lives in Halifax County may join. (434)575-7916
• Danville Postal Employees CU – Anyone who works for the Danville Post Office can join. (434)793-4132
• Martinsville Dupont Credit Union – Once the credit union that served the old DuPont plant in Martinsville. Now they welcome anyone who lives or works in Martinsville, Henry County, Patrick County, Franklin County, Pittsylvania County, and Danville.
• Martinsville City Employees CU – Anyone who works for the City of Martinsville. (276)632-7775
• Martinsville Postal Employees CU – Anyone who works for the Martinsville Post Office can join. (276)632-7775 (yeah it’s the same number as Martinsville City Employees CU, not a typo, they’re small and they share the same space and employees.)

Update 2-17-2008: A revised edition of this post appeared in the Danville Register & Bee opinion section today. Here is a link to that column.

What not to do at Christmas (or any time of year).

For most of us the Holiday Season and the weeks after it are usually pretty tight financially. There are gifts to buy, regular bills, and then there are those non-regular bills like taxes or insurance. This year my family even has the added pleasure of paying a $1,500 deductible for a recent hospital stay. At times like these when bills are piling up and it’s nearing that overwhelming point, it can be very tempting to consider an alternative like a “quick cash” place. This type of debt is a bad idea. If you don’t believe me then look at this video interview with a woman who used to run a Payday Loan store.

If you’re financially exhausted then it’s a good idea to sit down and work on a financial plan. Here are a few characteristics your plan might include:

• It doesn’t have to be complicated, simpler is usually better.
• It will probably show how much money you expect to make over the next several weeks. It should also involve planning how to spend that money. This is probably the most important step. But be prepared to face the possibility that the money coming in is not enough to cover what needs to go out! If that’s the case don’t panic. This is why you’re making a plan, to figure out how you are going to make it through.
• It might include contacting the places you owe money to and making arrangements to pay over time. That’s what I’m going to ask our local hospital about! 😉
• It might include making an appointment to sit down with someone at the credit union for some honest financial counseling and advice or to look into re-structuring your existing debts.
• Lastly, if your plan does involve a loan here at crunch time, consider the different options available to you before getting it and be sure that the new payment will not put too much of a burden on you either in the short-term or in the long-term. A credit union Christmas loan has a very low interest rate(9.5%), can be paid back over 12 months, and you don’t have to borrow the whole amount.

The credit union wants you to be prosperous all year long. If you’re struggling, tell us. We’ll listen to your story. And we’ll try to offer real help. So have a Merry Christmas but remember to resist the temptation to go overboard on spending, and not to rush into any loans or purchases. Most of all, avoid taking those high interest loans or Payday Loans. The only people such loans benefit are the executives who own the Payday Loan stores.