| OTTAWA, Sept 8
OTTAWA, Sept 8 More Canadian credit unions are
offering lower-cost alternatives to high-interest payday
lenders, a product they say is needed to meet increased demand
for emergency loans and prevent borrowers from becoming trapped
Credit unions, major financial players in some Canadian
provinces, are offering the product as the economy struggles
with weak oil prices and high debt levels.
Executives say because credit unions are owned by members,
they can provide loans more cheaply than for-profit payday
"We are trying to target the market of the payday loan
providers, bring people through the door and hopefully get them
onto stronger financial footing," said Eddie Francis, president
of WFCU Credit Union, which publicly launched a payday service
Payday loan demand is seen by many as a byproduct of
Canada's weak economy, which shrank in the second quarter.
Household debt is also near a record high.
"You just need to look out the window of any credit union
branch or bank branch and what do you see across the street but
a payday lender," said Linda Morris, a senior vice-president at
Vancity Credit Union.
Canadian authorities have stepped up scrutiny of the
industry. Critics say the high-interest loans, meant to be a
bridge between paychecks, can keep people in debt.
Vancity's loans have a 19 percent annual interest rate,
meaning it would cost C$2.20 ($1.70) to borrow C$300 for two
weeks. Some payday lenders charge as much as 600 percent on an
About a quarter of the roughly 80 credit unions in Ontario
have taken a serious look at payday lending, said Megan McIver,
director of government relations at Central 1 Credit Union.
Tony Irwin, president of the Canadian Payday Loan
Association, said credit unions may work for some people, but
will not replace all 1,400 payday loan outlets in the country.
Irwin said credit unions will not necessarily provide as
large a loan as payday lenders do. He said his members must
charge such high interest rates because payday loans are
expensive to provide.
Jeffrey Schwartz, executive director at Consolidated Credit
Counseling Services of Canada, said payday loans are a huge
problem for many of his clients, adding so-called "under-banked"
people should be brought into the conventional system.
"Low interest payday loans may encourage them to stay in
that situation and that's a concern," he said.
($1 = 1.2917 Canadian dollars)
(Editing by David Gregorio)