# Presentation: 668955

## Slide 1

## 
Post Dated Check
$300 Maximum Loan
Maximum Fee $15 per $100 Borrowed
Term Generally 2-3 Weeks

- Post Dated Check
- $300 Maximum Loan
- Maximum Fee $15 per $100 Borrowed
- Term Generally 2-3 Weeks

***Payday Lending in North Carolina****     *

## 
Consumer Check Amount $300
Less Fee $45
Proceeds to Consumer $255
Interest Rate 300% to 600% APR         (Depending on Term of Loan)

- Consumer Check Amount $300
- Less Fee $45
- Proceeds to Consumer $255
- Interest Rate 300% to 600% APR         (Depending on Term of Loan)

***Typical Payday Transaction***

## Payday Lending in North Carolina

| Annual Percentage Rate* | Finance Charge | Amount Financed | Total of Payment(s) | Number  |
| --- | --- | --- | --- | --- |
| 456.25%
451.90%
456.25%
458.86%
456.25%
458.11%456.25%
457.70%
460.08%
*Based on 14 day term | $8.75
$13.00
$17.50
$22.00
$26.25
$30.75
$35.00
$39.50
$45.00 | $50.00
$75.00
$100.00
$125.00
$150.00
$175.00
$200.00
$225.00
$255.00 | $58.75
$88.00
$117.50
$147.00
$176.25
$205.75
$235.00
$264.50
$300.00 | 1
1
1
1
1
1
1
1
1 |

***Payday Lending in North Carolina***

## Maximum Amount $500
Maximum Term 31 Days
Requires SECU Checking Account
Requires Direct Deposit at SECU
Underwriting Criteria:  Breathing, Not Under Bankruptcy
Interest Rate 12.00%

- Maximum Term 31 Days
- Requires SECU Checking Account
- Requires Direct Deposit at SECU
- Underwriting Criteria:  Breathing, Not Under Bankruptcy
- Interest Rate 12.00%

***SECU Salary Advance Program***

## Just another form of a line of credit! (HELOC, credit card, retail line)
Automated advances, repayment
No new data processing systems!
No new legal opinions or disclosures!!
No new training of consumer lenders!
No new collection requirements

- Automated advances, repayment
**No** new data processing systems!
**No **new legal opinions or disclosures!!
**No **new training of consumer lenders!
**No **new collection requirements

***SECU Salary Advance Program***

**... ****The most “profitable” loan we make!!**

## SECU Salary Advance Program

| Annual Percentage Rate | Finance Charge | Amount Financed | Total of Payment(s) | Number  |
| --- | --- | --- | --- | --- |
| 
12.00% | 
$2.50* | 
$500 | 
$502.50 | 
1 |

- *Based on 15 day term

***SECU Salary Advance Program***

## SECU Salary Advance Program

| Interest Rate | 12.00% |
| --- | --- |
| (Loan Losses) | (4.00)% |
|  | 8.00% |
| (Cost of Funds) | (4.00)% |
|  | 4.00% |
| SECU Operating Costs | (2.00)% |
| Return on Assets (ROA) | 2.00%* |

***Basic Economics...***

***Current SECU Overall Return on Assets (ROA) Target is 1.00%**

***...******a rate of 18% would be entirely conscionable!***

***SECU Salary Advance Program***

## SECU Salary Advance Program

| Interest Rate | 18.00% |
| --- | --- |
| (Loan Losses) | (4.00)% |
|  | 8.00% |
| (Cost of Funds) | (4.00)% |
|  | 4.00% |
| SECU Operating Costs | (2.00)% |
| Return on Assets (ROA) | 8.00%!! |

***What if?***

***Current SECU Overall Return on Assets (ROA) Target is 1.00%**

***...******a rate of 18% would be entirely conscionable!***

***SECU Salary Advance Program***

## SECU Salary Advance Program

| Interest Rate | 36.00% |
| --- | --- |
| (Loan Losses) | (4.00)% |
|  | 8.00% |
| (Cost of Funds) | (4.00)% |
|  | 4.00% |
| SECU Operating Costs | (2.00)% |
| Return on Assets (ROA) | 26.00%!!! |

***Under Talent Bill...***

**... ****What other legitimate consumer product returns 26.00%?**

***SECU Salary Advance Program***

## SECU Salary Advance Program

| Interest Rate | 12.00% |
| --- | --- |
| (Loan Losses) | (0.0025)% |
|  | 11.75% |
| (Cost of Funds) | (4.75%) |
|  | 7.00% |
| SECU Operating Costs | (2.25%) |
| Return on Assets (ROA) | 4.75% |

**The true loss ratio is only 1⁄4 of 1% on this product.**

***SECU Salary Advance Program***

***Here’s our actual... November 2006***

## Savings Enhancement March 1, 2003

Supplemental Savings Account
5% of Proceeds to Savings 
	(Example $100 Loan, $5 Shares)
Pledged Against Loan; SECU becomes a secured lender!
If Withdrawn, No Salary Advance Loan for 6 Months
Break the Cycle; currently $10+ million in balances!

- Supplemental Savings Account
- 5% of Proceeds to Savings
- 	(Example $100 Loan, $5 Shares)
- Pledged Against Loan; SECU becomes a secured lender!
- If Withdrawn, No Salary Advance Loan for 6 Months
- Break the Cycle; **currently $10+ million in balances!**

***SECU Salary Advance Program***

## Payday Lender	
$15 per hundred borrowed or $75 fee on a $500 loan for 1 month.
SECU
1% of amount borrowed or $5 in interest on a $500 loan for 1 month.
40,000 SECU members use the salary advance loan each and every month.
Each member “saves” $70 each month (theirs $75 – ours $5!).
Monthly savings:  $70 x 40,000 people = $2.8 million.
Yearly savings:  $2.8 million x 12 months = $33.6 million.

- $15 per hundred borrowed or **$75 fee on a $500 loan for 1 month.**
**SECU**
- 1% of amount borrowed or **$5 in interest on a $500 loan for 1 month.**
**40,000**** **SECU members use the salary advance loan each and every month.
- Each member “saves” $70 each month (theirs $75 – ours $5!).
**Monthly savings**:  $70 x 40,000 people = **$2.8 million**.
**Yearly savings**:  $2.8 million x 12 months = **$33.6 million.**

***Let’s calculate that difference...***

**... **Wealth **creation** at its best!!!!

## 
... Up to half the people who take out sub-prime loans could qualify for a prime loan which charges as much as 4% less interest ...
 				(“Fannie Mae”, Economist 8/31/2002)

- ... Up to half the people who take out sub-prime loans could qualify for a prime loan which charges as much as **4%** less interest ...
-  				(“Fannie Mae”, *Economist* 8/31/2002)

***... ******One More Thing ...***

## The Social Problem

| RATE | 15 YR TERM | 30 YR TERM |
| --- | --- | --- |
| 7.75% | $941.28 | $716.41 |
| 8.75% | $999.45 | $786.70 |
| 9.75% | $1,059.36 | $859.15 |
| 10.75% | $1,120.95 | $933.48 |
| 11.75% | $1,184.13 | $1,009.41 |
| 12.75% | $1,248.84 | $1,086.69 |
| 13.75% | $1,314.99 | $1,165.11 |

**... ****Give someone back 15 years of their life!!**

**Loan Amount:  $100,000**

**The social cost of a 4% “mispricing”...**

***The Social Problem***

## 100% Basic Transportation Loans (to $15,000); Hertz/Enterprise.
First Time Homebuyers Mortgage (102% Financing) low closing costs; interest on escrow; no PMI; in-branch refinances.
BALANCE Financial Counseling (No Cost); CCCS San Francisco.
Check Cashing?? (Check Cashers Charging 1-3%!)
Financial Planning – Members Trust/XCU Capital Financial Assessment Program; “Not Yet Wealthy”; “Special Needs”.

- First Time Homebuyers Mortgage (102% Financing) low closing costs; interest on escrow; no PMI; in-branch refinances.
- BALANCE Financial Counseling (No Cost); CCCS San Francisco.
- Check Cashing?? (Check Cashers Charging 1-3%!)
- Financial Planning – Members Trust/XCU Capital Financial Assessment Program; “Not Yet Wealthy”; “Special Needs”.

***Other Opportunities***

## Credit Unions are not a four letter word...

***	******... ******and banks are vital to the success of our communities!***

## So, 

**Go ahead, do the right thing!**
**Questions.**