Here in Britain we are regularly told that we are in “cowboy” territory as far as short term loans providers are concerned and the original cowboy country – the United States of America – is a model of strict regulation and declining payday activity.
It is a bit of a surprise then that any glance at the online news from the other side of the pond reveals hundreds of references to sorry tales about the “evil” short term loans industry and attempts by state and federal authorities to tighten things up a little. Maybe things are not so different after all. Certainly, the rise and rise of the payday industry has been firmly linked to the onset of the long recession after the 2007 / 2008 credit crisis and this has affected many industrialised countries in very similar ways.
News from over the water suggests that, in some states at least, the enthusiasm for short term loans by millions of ordinary Americans in need of a quick cash fix is being redirected towards to the less interest hungry credit union sector.
Credit unions in the U.S. of A. work very similarly to those that operate over here and offer short term loans at interest rates in the low twenties APR, rather than the startling figures of the payday sector, which can reach the dizzying heights of 4000% or more if loans are extended past the due by date.
Credit unions operate a little differently from banks as their customers are also members. They offer short term loans as an option, apart from their main services, but the push has been for the unions to take over the job that the payday sector has been doing and try to remove those who are struggling from what is seen as a vicious debt cycle.
An example of a typical American credit union is the St Louis Community Credit Union, which has been set up to counter the payday influence and provide a cheaper loans service to those in need. Just like in Britain, the credit unions acknowledge that there is a significant number of people in the community that have experienced the double whammy of rising costs and declining income. Loans that can be taken advantage of easily on a short term basis are certainly in demand on both sides of the Atlantic, it seems.