Regulation Changes Could Expand Short-Term Loan Opportunities at Credit Unions

Payday lenders already outnumber McDonalds in some states. As new financial institutions enter the playing field of short-term credit, how can you meet your members’ needs before the competition does?


The evolving recovery market makes now a crucial time for credit unions to balance public demand for short-term credit with responsible loans.

Long before the NCUA considered raising the maximum allowable interest rate on short-term loans from 18% to 28%, many credit unions had already proven themselves successful short-term credit competitors without resorting to higher rates. By utilizing low-interest programs with built-in safety nets, this group spared themselves from the negative PR surrounding higher rates and still protected members from predatory lenders. 

Legal crackdowns have limited the reach of predatory lenders, but a possible cap hike could expand competition. A 2006 map from California State University, Northridge, shows payday lenders, in their heyday, largely outnumbered McDonalds in many parts of the nation both in total locations and locations per capita.

Now is the time to get ahead of the pack and formulate a strong short-term credit strategy.