The loans would be from $100 to $500 and have an APR of 24.99%. Payments will be debited from the borrower's VACU account. There will be no credit check and only one loan at a time will be allowed. There are other qualifications and details here.
So, is the Commonwealth now in the payday lending business? Yeah, I guess one could say that, but there are differences. The interest rate, while still higher than I want to pay, is way under the rates charged by the loan sharks in the gaudy buildings found in most cities. Borrowers have to learn a little personal finance and maintain an account at VACU.
I'm sure some wing nuts will scream about the state competing with private businesses, but that isn't exactly accurate. VACU is not a state agency, but rather a credit union like many others affiliated with businesses and governments. The financial literacy aspects of the program are a big plus and not something the predators are likely to offer since the first lesson would be don't borrow from these crooks.
We'll have to wait and see how successful the Virginia State Employee Loan Program is and how many employees take advantage of it. But, it does provide a trial run and a good model for other organizations who may be interested in providing fair and reasonable small loans. This may be the first step in controlling the blight of payday and car title lenders.
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I guess as a state employee I have to ask the question as to why this program was conceived. Someone must have gotten the info that state employees are using the services of the loan sharks? And why would that be? Maybe it's because the housekeeper employed at a local state psychiatric hospital who has no significant other, two children and makes $16,000 a year.Or the psyc aide who makes $20,000 a year and is struggling to pay for their rent, food and gas.
You bring up a valid point, but a separate issue. I agree there are many underpaid state, local, and school division employees in VA. Perhaps it is true that some state employees have been victims of the loan sharks and that is behind this initiative... but I doubt they go to the yellow storefronts in any higher rates than the general population. Wonder if such stats even exist?
I think this was Kaine's (wonder who first came up with the idea?) way to strike a blow at the payday loan industry... since the General Assembly failed to do in any significant way over the past couple of sessions. This program sets a precedent that other employers with affiliated credit unions might follow... perhaps the NN Shipbuilding CU which is a biggie in SE VA? I do wonder if local and school board employees can join VACU and take advantage of this program if needed? So often the state comes up with something for state employees but leaves out counties, towns, cities, school divisions.
I was talking to a co worker of mine,a Registered Nurse, and she said that she uses the payday lenders and often runs into co workers there (other RN's). Generally RN's are paid pretty well. What does this say about the current state of our economy?
It says the Bush hangover will last a long time.
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