How grassroots community lending is addressing the high cost of payday lending

Our continuing effort to help bring awareness to the plight of millions of Americans suffering from poor financial health brought me and my colleagues at LexisNexis® Risk Solutions to the America’s Credit Union Conference (ACUC) in Seattle back in June.

Conferences are important venues where industry trends, the latest innovations, and experiences are shared in an effort to support the growth of our business and professional skill-sets.  The opportunity to listen to the challenges facing your peers is reassuring, thought-provoking and humbling – sometimes simultaneously! Reassuring in that you share similar challenges; thought-provoking because you are able to meet those who may be further along in solution development; and humbling because you realize there are some critical problems that seem so daunting.

Good financial health is daunting for millions. According to the CFPB, 400% APRs are typical for many payday loans1. This is all too common across the U.S. and while some states have enacted laws to curb this practice, government regulation may not and should not be enough.  It is encouraging to see how some Credit Unions are proactively responding to this financial health crisis.

The conference session entitled Credit Unions’ Untapped Potential Payday Loans was a great example of how one Credit Union has created an alternative to payday lending.  Luis Peralta, President of Nix Neighborhood Lending and Chief Administration Officer at Kinecta Federal Credit Union, presented their Payday Alternative Loan program (PAL) that broke the cycle of debt for 90% of participating borrowers. Furthermore, by reporting the loan performance to the credit bureaus, PAL is providing a gateway for these borrowers to more affordable financial services.  Read more about Kinecta’s PAL program here.

After learning about Kinecta’s PAL program, the Filene Research Institute, a nonprofit finance-industry focused think tank, received a grant from the Ford Foundation to pilot products in the U.S. to benefit low and moderate financial consumers.  Click here for a video and more information.

When you dig deeper into the Kinecta solution, you will find the PAL program was made possible because of the use of LexisNexis Risk Solutions’ RiskView data and scores in their underwriting process.

Click here to learn how LexisNexis® Risk Solutions alternative data and analytic services are empowering lenders to develop affordable lending and banking solutions for the unbanked and underserved markets.


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