New FDIC Report Shows Rate-Limited Short-Term Loans Are Unprofitable and Unsustainable

/PRNewswire/ -- The FDIC's latest report on its Small-Dollar Loan Pilot Program sheds new light supporting the short-term payday loan industry financial model for those needing short-term financing.

Most of the banks that participated in the FDIC pilot program admit that their goal is not to earn profits, but is instead to "generate goodwill" within their respective communities and to qualify for government Community Reinvestment Act credit. Further, the 446 participating bank branches made a mere 8,346 loans over the course of a year, an average of one loan per branch every 20 days. In contrast, the short-term payday loan industry makes more than 100 million loans per year.

An artificial rate cap makes short-term lending unprofitable, as the FDIC report explains: "[g]iven the small size of SDLs (small-dollar loans)... the interest income and fees generated are often not sufficient to achieve short-term profitability." Instead, banks participating in the FDIC program use their low-priced loans to sell customers on other financial services, including checking accounts with extremely expensive overdraft protection fees.

The Small-Dollar loans in the FDIC's program are not comparable to short-term payday loans, as many participating banks have stringent qualification criteria for borrowers. For example, the FDIC cites Citizens Trust Bank as a case study in its report, but the bank requires borrowers to have been at their current address for at least a year, and to meet a fixed credit score requirement and show six months of income. Other banks require a linked savings account and credit report. In contrast, most short-term payday loans simply require a bank checking account and a paystub to qualify for a low-dollar loan.

"Adults are best served when they can choose among many competing lending options," said Samantha O'Neil, Communications Director at the Center for Consumer Freedom. "When Oregon set an APR rate cap, payday lenders left the state in droves and former payday borrowers increased their dependency on more expensive options, including checking account overdrafts." Other reports from the Federal Reserve Board in New York and university economists have echoed that concern.

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Peach State Credit Solutions Announces “Fresh Start” Program

(BUSINESS WIRE)--Peach State Credit Solutions is pleased to announce the “Fresh Start” program designed to award free credit repair to one individual per month.

It is no secret that some have become over-extended while others are still paying for credit mistakes made long ago. These factors, as well as others, lead to a lower credit score. Often times an individual’s credit score is not an accurate picture of their current situation. The simple service that Peach State Credit provides can give most people with bad credit a second chance.

All Peach State Credit Solutions customers will be automatically considered to win. The winning candidate will receive a full refund on the credit restoration service, a value of $695.00. Winners will be chosen on the last Friday of every month starting March 27, 2009.

“It is our ethical responsibility to do what we can do have a positive impact on the community. By helping to restore the credit rating of one individual per month for free, we can be part of the solution. Fresh Start can improve the standard of living for a very deserving individual,” says William Mikula, Manager of Peach State.

“Many can see the huge impact credit has on their daily lives to purchase a car or home, when applying for employment, or even in trying to obtain utility services. Our goal is to raise a general awareness of the individual credit score and the importance of resolving any outstanding issues,” explains Robert Groover, CEO of Peach State.

To apply, fill out the contact page at www.peachstatecredit.com or please email your name, contact phone number, and email address to contact@peachstatecredit.com. You can also apply by mail or in person at:

Peach State Credit Solutions, Inc.
5345 Bells Ferry Road
Atlanta, GA 30102

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Delta Community Credit Union Shares Earnings with Customers

/PRNewswire/ -- Delta Community Credit Union, Georgia's largest credit union, believes in sharing its financial successes with its customers. A strong capital base and solid financial results in 2008 enabled the credit union to give back approximately $5.0 million to its members as a Patronage Reward and to further strengthen its capital position, which remains significantly above the regulatory target for well-capitalized status.

Under the Patronage Reward, customers earned additional deposit dividends or loan rate rebates based on the amount of business they conducted with the credit union last year. Customers who maintained positive balances in checking, savings, money market and IRAs received a bonus equal to 4.50 percent of the total dividends they earned on those accounts during 2008. Borrowers in good standing received a rebate equal to 2.50 percent of the interest they paid on their loans during the same period.

"The Patronage Reward is just one of the many ways Delta Community gives back to our customers and the communities we serve," said Rick Foley, President and CEO. "In 2008, we opened six new branches and introduced several new products, including the well received 4.50 percent APY StandingStrong CD. We also awarded three scholarships to high school seniors, honored ten young 'Hometown Heroes' for their contributions to the community and gave more than $200,000 to Children's Miracle Network."

"Sharing our earnings with our members is one important difference between Delta Community Credit Union and other financial institutions," Foley continued. "In light of the current economic climate, we believe it's a difference that is more important than ever."

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