Credit unions are seeing oppourtunies to offer payday loans. I think this is great for the industry. Competition drives prices down and gets more people using the product and keeps legislators from blacking out a state.
The reality is that payday lenders have a much different cost structure than credit unions and banks. Tom Linafelt, spokesman for QC Holdings, owner of the biggest chain of payday loan shops operating in Missouri says “One of the great myths of our industry is that we are making huge profits,” Costs consume $10 to $12 of each $18 loan fee on a $100 loan, he says. His company, based in the Kansas City suburbs, earned a $13.6 million profit last year.
Payday lenders are at a huge disadvantage b/c they do not control the checking account, like credit unions and banks. The charge offs are much higher.
One thing for certain is that payday loans are big business in Missouri. Almost $870M in loans accruing yields an estimated $157M in fees annually.
Read the full article at the St. Louis Post Dispatch.
