How Do QCash Small Dollar Loans Help Member Health?

Payday loans have not been received very favorably recently, by either the general populace nor by the legislature. And yet, at QCash, we still see small dollar loans as an important aspect of credit union member health. Why do we continue to hold this viewpoint?


We understand that financial health means different things to different people. Recently, we read a study that claimed that around 44% of Americans couldn’t come up with $400 cash in an emergency. To us, this indicates that most Americans do not have access to an extra influx of money to aid them with anything that might come up. While we might most often think of financial health as a product of income, savings, wealth management, and planning for the future, we know that for many people it means having flexibility and options. They want to know that, regardless of their cash flow, if something comes up that requires a little extra money, they’ll be able to take care of it.

Financial Health is a Road Trip

Everyone’s destination is a little bit different. In the game of Life, some of us want to retire to Millionaire Estates, while others want to retire to Countryside Acres. How we get there will differ, and how the game ends may also be a little different, but in the end, we’re working toward the same goals: a happy life with enough financial stability that can last us.

The road to financial health is also littered with obstacles, pit stops, detours, and—we hope—a few great restaurants. We keep in mind that many hard-working, responsible Americans sometimes struggle to cover sudden costs or loss of income stemming from medical emergencies, car troubles, and job transitions. In such times, it’s better to have options. Safe options. Options that don’t come at the predatory rates endemic to payday loan centers. Options presented by the same people who provide their other banking services. Options that come with the comfort and security that only their credit union can afford them.

Each member’s route to financial health is unique, so we want to offer as many possible routes to success as we can. Whether someone needs it or not, having access to an emergency small dollar loan has helped thousands of credit union members per month. It’s not just for the foreseeable obstacles that pop up—it’s for the nasty surprises. Members can get small, fast loans when they need them most.

Institutional Health

 At QCash, we also consider small dollar loans a boon to credit unions. It expands the portfolio of services that they can provide, and it keeps credit union members from jeopardizing their financial health by pursuing loans at less-reputable payday loan centers.

We’ve proven that the loans we provide, at the rates we suggest, are a net positive for credit unions. Our service is faster and requires less overhead than traditional payday loan services, which allows us to offer little lifelines to those in need. Nevertheless, we emphasize the financial health of your members, because we understand that healthy members mean a healthy credit union.

 

Are QCash and Payday Loans the Same Thing?

What are the Benefits of Credit Union Payday Lending?

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What are the Pros and Cons of Partnering with QCash Small Dollar Lending?

Introducing any new technology to a tried-and-true sector is a recipe for radical change. Generally, the change is for the positive, but that doesn’t mean that there aren’t any drawbacks to innovation. The question is when partnering with financial technology companies, what do you give, and what do you get?

When you’re on the front lines of innovation—the cutting edge, if you will—adaptability is key. At QCash, we understand that strategy, technology, and evolution are primary concerns for staying alive and viable. Imagine our surprise, then, when we heard about the new battlefront technology: the double-edged sword. A blade that drastically increases versatility, but that also cuts both ways. It was a game changer, to be sure; however, it presented ways to hurt us as well, if we weren’t careful.

Fortunately, with respect to financial technology, we’ve had time to understand a little about double-edged swords. We realize that we can’t continue to provide bleeding-edge, innovative technology and services without disrupting elements of standard banking and credit union operations. With that said, let’s take a look at the drawbacks of partnering with an experienced fintech company.

The Cons of Partnering with QCash

Part of the digital transformation package means embracing new technology. Before we talk about how that benefits you, we should consider the full impact that it might have.

Whereas most credit unions may be accustomed to learning new processes and practices every so often, fintech companies focus only on providing value through the specific services that they provide. As a result, they learn to reimagine, fine tune, and change gears quickly. New developments come faster than regulations do. Often, a fintech company will implement new technology or protocols every 45 or 90 days; many credit unions are used to adapting to new things only every six months or so. This can present a significant increase to changes to workload or style for credit unions.

Essentially, the downside to partnering with a fintech like QCash is that we tend to push forward rapidly with innovation, which can require testing, education, and fine-tuning. Consistently reevaluating best practices isn’t easy. The pace can be rather fast.

The Pros of Partnering with QCash 

The pros of partnering with a fintech largely speak for themselves. Fintechs provide access to data, services, protection, planning, and more, all that wouldn’t be available or feasible otherwise. With QCash, we offer small-dollar loans at reasonable rates to help protect your members from predatory payday lenders who charge exorbitant interest rates. We also do it with a high degree of demonstrable protection and moderate benefit to your credit union.

Beyond that, fintechs like QCash offer something a little less tangible, but no less important. First, we can help you get to market to serve your members faster than you could do yourself. Developing and testing new technology takes time when you have so many other things to consider, so fintechs are able to focus intensely on perfecting the service or product at hand.

Fintechs also ensure that their products and services are highly integrated so that credit unions are able to focus on daily operations rather than worrying too much about the development and integration of new technologies. They package their offerings so that they have a minimal net impact on day-to-day minutiae, but a maximal positive impact on productivity and member services.

What Interest Rate Should a Small Dollar Payday Loan Program Charge?

QCash Payday vs Small Dollar Loans: What’s the Difference?

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How Does QCash Partner with Fintechs?

In the world of financial technology, it’s important to know that companies can form partnerships to better serve their clients. So how does QCash partner with other fintech companies?

Imagine a world where fintech companies received report cards. Not just the usual A, B-, C+, or D nonsense, but a report card with healthy evaluative comments on it. Both in preschools and in elite academic institutions, we know such methods of evaluation are still alive and well. While it’s certainly easy to take comfort in the knowledge that it’s possible to receive a passing grade by keeping your nose down, working hard, and offering consistent, dependable work, there’s always that last area: group projects. Group projects demonstrate the ability to communicate effectively, manage shared goals, and build something larger and more comprehensive, in a shorter timeline, than would be feasible by a lone wolf.

Most people don’t like group projects in school because students are notorious for bringing different levels of energy and care to a job. Fortunately, the professional level at which we operate is replete with dedicated professionals with skin in the game. We at QCash believe that the ability to work closely—and partner—with others in the financial industry is paramount to providing seamless, integrated solutions to credit unions members nationwide. We’re certain that, were we to receive a written grade, it would say that we have a strong ability to facilitate effective, mutually beneficial group work (or, in preschool terms, that QCash “plays well with others”).

What Do Fintech Partnerships Accomplish?

We understand that other fintech Credit Union Service Organizations (CUSOs) can partner for various reasons. We see synergies in the solutions that different companies provide. In areas where companies dovetail, the may be able to work together to offer a new service that would have taken too many resources to do in-house.

For example, we look to provide small-dollar and payday lending that benefits both credit unions and their members. This requires that we minimize the amount of overhead required to evaluate and approve loans. We’ve talked with several alternate data providers about how to tweak operations for underwriting loans, which will allow us to better service new members and streamline the loan process. We’ve found that working with other fintech companies allows us to identify new ways we can serve our clients.

Ideally, strong partnerships among fintech CUSOs result in complementary products and services: one picks up where the other leaves off. QCash is poised to utilize the work of many other fintechs and, in return, make their products more actionable.

Examples of Working Partnerships

 We’ve already mentioned our relationship with data companies and how they help us better underwrite small-dollar loans, but our partnerships don’t end there. We also talk with international financial companies—with Canadian fintechs, for example—to see how we can expand our service. Another organization we’ve worked with is OnApproach. By connecting with their data lake, and through leveraging their newly released app store, we’ve looked into creating a QCash app that’s accessible to their clients.

We appreciate working with other fintech companies because, although we know we provide a good service on our own, we know that we can often build something stronger together. Through mutually-beneficial, complementary capabilities, we can provide solutions that do more and reach further. An A+ isn’t enough. We also want “plays well with others.” It’s better for everyone.

What is a Small Dollar Loan?

Payday Loans Good or Bad for Borrowers?

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QCash Payday vs Small Dollar Loans: What’s the Difference?

QCash Payday vs Small Dollar Loans

Unexpected things come up in life. Car repairs, medical emergencies, and other expenses that must be taken care of seem to pop up at the worst time. Most Americans live paycheck to paycheck. While some people do have savings accounts, they may not have enough money saved to take care of a huge bill from the mechanic or emergency room. Many people will look for a short term loan because they could have afforded to pay for the expense if it happened right after payday. They turn to payday lenders to get the money that they need. Many credit unions now offer two short term loan products to their members to help them meet their needs: QCash and QCash Plus. Are QCash and payday loans the same thing? While they have some similarities, they are actually very different.

Both Designed to Meet Immediate Need for Cash

QCash payday vs small dollar loan are both designed to help people with a very important problem: having the money they need to pay for what they need. Generally, payday lenders don’t care about how you plan to use the money. They care about whether you can pay it back on time. With QCash and QCash Plus, the application process is totally private. There is no question that asks credit union members why they need the money.

No Credit Checks

Another similarity between the two is that there’s no credit check. While there are some qualifications that must be met for either product, there’s no actual credit check. Generally, the qualifications involve the income coming into the household. This is often compared to current obligations. The purpose of reviewing a debt to income ratio, as it is called, is to analyze whether the recipient has the ability to repay the loan under the loan conditions.

What Are the Differences Between Payday Loans and QCash Products?

While QCash payday vs small dollar loan products have some similarities, they’re actually quite different. Here’s what you need to know.

Payday Lenders Are For-Profit Companies

A for-profit company is a company that is in business to make money. In and of itself, making a profit isn’t a bad thing. However, many payday lenders get into trouble over a concept known as “predatory lending.” This means that when they make these short-term loans to people, they’re doing so with terms that are harmful to the recipients. When people cannot pay their loans, many payday lenders may offer to renew the loan, but that also comes at a cost. Those extra fees can make it next to impossible for people to pay off what they owe. Most of those companies won’t accept a payment agreement that allows people to make payments each week or month to pay off what they owe. When people can’t pay, they could be called by employees or debt collectors who threaten to have them arrested. Such threats are against the law, but that doesn’t stop them from engaging in bad collection practices.

Credit Unions Are Not-For-Profit Companies

Credit unions are not-for-profit companies. This means that the money we make goes toward overhead. Overhead includes things like utilities, technology, paying our staff members, and creating better facilities for our members to use. Have you ever wondered why credit unions can offer such low interest rates when compared to other financial or lending institutions? It’s because we’re not-for-profit.

Payday Loan Interest Rates Are Notoriously High

payday vs small dollar loan

Would you accept a loan for a car if the only interest rate available was 400%? What about 800%? Although that seems like an outrageous question, it’s an important one. If you’re in the middle of a financial crisis, getting a payday loan could put you into a similar situation. Payday loans have notoriously high interest rates that usually fall between 400 and 800%.

While desperate times may make you more open to getting the money you need at any cost, do the math. Even if you could have taken care of the unexpected expense on payday, could you afford it if it were 400% more expensive? For example, if you need $400, that might be doable on payday. Yet, 400% of $400 is $1,600.

If you need to renew a payday loan, you must pay a certain amount of money to do so. The interest on the original loan continues to build.

QCash payday vs small dollar loan products Have Lower Interest Rates

When compared to payday loans, QCash products have much lower interest rates. With QCash, you pay $12 for every $100 you borrow. That breaks down to 12%. With QCash Plus, the interest rate is 36%. However, QCash Plus provides short-term loans between $701 and $4,000.

The Application Process with Payday Lenders

To take out a payday loan, you would visit a payday lender in your area. You’d need to take proof of residence, proof of income, and photo identification. While the process doesn’t take an extremely long time, it can still take an hour or two. Online payday lenders take time, too, although you can apply anytime. In a true emergency, you may not have the luxury of time.

Payday lenders generally give you cash or a check after you’re approved. If they give you a check, you’ll have to consider whether you can get it cashed. If’s it given to you in cash, you may have fewer issues.

The Application Process for QCash and QCash Plus

To apply for a QCash or QCash Plus short-term loan, credit union members can go through the application process at any time of the day or night through the QCash link on the credit union website. After completing the application process, most people receive a notification of approval within just a few seconds. Once approved, the money is automatically placed into your credit union account. There’s no waiting to cash a check.

Related Content

What are the benefits of Credit Union Payday Lending?

Are Payday Loans good or bad for Credit Union Members?

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Buy vs Build?

July 30, 2018
by Ben Morales, CEO QCash

Why would a credit union make their own payday lending platform versus using the QCash platform?

I’m often asked, “Why wouldn’t a credit union just do this on their own versus using the QCash platform?”

The bottom line is, what we want from QCash Financial is everyone to deliver small-dollar lending.

Credit unions need to get back to our roots of where they began. Credit unions started by delivering small-dollar loans to their members, and we’ve gotten away from that over time. At the end of the day, we just want everyone to get back to providing for their members. Above all else, this is a means of really eliminating predatory lending. We know credit unions have a lot of things to think about with regulatory concerns, member implementability, and member need. If we can help make this an easier and quicker process to implement, then we would say, “That’s why you should use us.”

QCash has over 14 years of experience with running a small-dollar loan program, which we bring to the table to help credit unions manage their small-dollar loan programs. QCash wants to make sure it’s helping them in achieving their member goals, their mission goals, and their margin goals. We’ve specifically built that in as part of our program to create this platform for credit unions. That’s our differentiating factor.

Credit unions have delivered and created small-dollar loans since the beginning and are still doing that today. There’s one or two out there that are also doing what QCash is doing, but they haven’t added the automation parts of it. Leveraging that automation to lower the cost so that you can deliver this to a broader market is key.

Scalable

The issue that we have today is that the solutions in the market aren’t scalable. You can’t deliver thousands of e-loans to the members that need it in the time that they need it with conventional underwriters and systems. It’s a slow process. Most systems right now are using traditional methods, they’re using underwriters, they’re pulling credit. Let’s just remember how many credit invisible, thin-file members with no credit, or thick-file people that truly need these loans will be excluded if we use credit score. It’s a great start but they need to advance to really serve the market. If they really want to get small-dollar loans to the consumers that need it, they need to change their method.

Members: “Thin File” or “Thick File”

This is a great first-time opportunity for thin files. A thin file is typically a member that possesses no credit as they stand currently. Thick file is someone who has probably gotten into a little bit of trouble and hasn’t been able to manage their finances adequately. They would possess quite a bit more credit than a thin file. Small-dollar loans are a great opportunity to pull them back into the fold and begin to coach them into being able to have access to more affordable financial services.

QCash Financial has seen firsthand some of the benefits for thin/thick-file clients. At WSECU, a number of members are millennials whose parents were members initially. Ideally, part of their first loan would come from QCash as a way to solve a problem of, “Hey, my car engine blew up, and I need a new car engine,” or, “Hey, I have this medical situation, a dental emergency that I need to attend to,” or “Hey, I have this pet emergency that I’ve got to solve.” QCash would be the means through which they receive the necessary funds to deal with these emergencies.

Typically, from a younger perspective, it’s one of those emergency situations that says, “Where do I get money from?” People first go to their family, but if that’s not there, they’ll use a QCash small-dollar loan to do that. That’s where the member service reps will educate them and inform them of the product availability.

Ultimately, the hope is that QCash Financial will be able to provide small-dollar lending to all credit unions because it is a safer and more efficient process that is easy to implement.

Read more here.

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Are QCash and Payday Loans the Same Thing?

QCash Loan or Payday Loans

July 26, 2018

Unexpected things come up in life. Car repairs, medical emergencies, and other expenses that must be taken care of seem to pop up at the worst time. Most Americans live paycheck to paycheck. While some people do have savings accounts, they may not have enough money saved to take care of a huge bill from the mechanic or emergency room. Many people will look for a short-term loan because they could have afforded to pay for the expense if it happened right after payday. They turn to payday lenders to get the money that they need. Many credit unions now offer two short-term loan products to their members to help them meet their needs: QCash and QCash Plus. Are QCash and payday loans the same thing? While they have some similarities, they are actually very different.

Both Designed to Meet Immediate Need for Cash

Payday loans and QCash products are both designed to help people with a very important problem: having the money they need to pay for what they need. Generally, payday lenders don’t care about how you plan to use the money. They care about whether you can pay it back on time. With QCash and QCash Plus, the application process is totally private. There is no question that asks credit union members why they need the money.

No Credit Checks

Another similarity between the two is that there’s no credit check. While there are some qualifications that must be met for either product, there’s no actual credit check. Generally, the qualifications involve the income coming into the household. This is often compared to current obligations. The purpose of reviewing a debt to income ratio, as it is called, is to analyze whether the recipient has the ability to repay the loan under the loan conditions.

While payday loans and QCash products have some similarities, they’re actually quite different. Here’s what you need to know.

Pay Day Lenders Are For-Profit Companies

A for-profit company is a company that is in business to make money. In and of itself, making a profit isn’t a bad thing. However, many payday lenders get into trouble over a concept known as “predatory lending.” This means that when they make these short-term loans to people, they’re doing so with terms that are harmful to the recipients. When people cannot pay their loans, many payday lenders may offer to renew the loan, but that also comes at a cost. Those extra fees can make it next to impossible for people to pay off what they owe. Most of those companies won’t accept a payment agreement that allows people to make payments each week or month to pay off what they owe. When people can’t pay, they could be called by employees or debt collectors who threaten to have them arrested. Such threats are against the law, but that doesn’t stop them from engaging in bad collection practices.

Credit Unions Are Not-For-Profit Companies

Credit unions are not-for-profit companies. This means that the money we make goes toward overhead. Overhead includes things like utilities, technology, paying our staff members, and creating better facilities for our members to use. Have you ever wondered why credit unions can offer such low-interest rates when compared to other financial or lending institutions? It’s because we’re not-for-profit.

Pay Day Loan Interest Rates Are Notoriously High

Would you accept a loan for a car if the only interest rate available was 400%? What about 800%? Although that seems like an outrageous question, it’s an important one. If you’re in the middle of a financial crisis, getting a payday loan could put you into a similar situation. Payday loans have notoriously high-interest rates that usually fall between 400 and 800%.

While desperate times may make you more open to getting the money you need at any cost, do the math. Even if you could have taken care of the unexpected expense on payday, could you afford it if it were 400% more expensive? For example, if you need $400, that might be doable on payday. Yet, 400% of $400 is $1,600.

If you need to renew a payday loan, you must pay a certain amount of money to do so. The interest on the original loan continues to build.

QCash Products Have Lower Interest Rates

When compared to payday loans, QCash products have much lower interest rates. With QCash, you pay $12 for every $100 you borrow. That breaks down to 12%. With QCash Plus, the interest rate is 36%. However, QCash Plus provides short-term loans between $701 and $4,000.

The Application Process with Pay Day Lenders

To take out a payday loan, you would visit a payday lender in your area. You’d need to take proof of residence, proof of income, and photo identification. While the process doesn’t take an extremely long time, it can still take an hour or two. Online payday lenders take time, too, although you can apply anytime. In a true emergency, you may not have the luxury of time.

Payday lenders generally give you cash or a check after you’re approved. If they give you a check, you’ll have to consider whether you can get it cashed. If’s it given to you in cash, you may have fewer issues.

The Application Process for QCash and QCash Plus

To apply for a QCash or QCash Plus short-term loan, credit union members can go through the application process at any time of the day or night through the QCash link on the credit union website. After completing the application process, most people receive a notification of approval within just a few seconds. Once approved, the money is automatically placed into your credit union account. There’s no waiting to cash a check.

To learn more about QCash or QCash Plus, contact us.

Learn more – DEMO and Blog

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What Interest Rate Should a Small Dollar Payday Loan Program Charge?

small dollar payday loans

What interest rate should a small dollar payday loan charge? While the financial services industry and its regulators debate what is the right APR for short-term, small-dollar loans, Americans in need of relief wait. Their waiting comes with a cost – a big one. PEW Charitable Trusts estimates U.S. consumers spend $9 billion annually on small-dollar loan fees. There is a number already vetted that would encourage more institutions to offer short-term credit at reasonable rates for consumers in need: 36. It’s time to stack hands on 36% APR and start helping more consumers get out of the debt trap.

Many advocates are already on board with the concept.

The National Consumer Law Center (NCLC) conducted research on how a 36% APR has legitimacy as a price point. They show that it would be a win-win for consumers offering access to affordable credit and would allow financial institutions to earn sustainable revenue to offer the loans.

Then there’s the FDIC pilot on small dollar payday loans that tested the 36% APR.  Additionally, the Center for Responsible Lending has stated its position that a 36% APR cap on payday loans most effectively stops the cycle of debt.

The Consumer Financial Protection Bureau’s most recent proposal would require lenders to underwrite payday and short-term small-dollar loans to ensure they are affordable to consumers. To avoid the stiffest requirements, such as assessing a borrower’s ability to repay a loan, installment lenders can opt for an alternative that effectively caps the rate at 36%.

Regulators state they want more lenders in the short-term loan market to help consumers; however, we already know the low success rate of expanding small-dollar lending at lower APRs. The NCUA allows for a 28 percent APR cap on small-dollar payday loans for federal credit unions, but it hasn’t generated much participation. In fact, fewer than 18 percent of credit unions offer these products today. The reason is that many justifiably believe they cannot create a financially sustainable short-term loan program with the 28 percent APR cap. That leaves tens of millions of credit union members lacking for a source of short-term credit without turning to predatory lenders.

The 36% APR is the sweet spot. And it’s already been tested and used for more than a decade. After all, it’s been the price point cap for small-dollar loans for military service members since 2006 as established by the U.S. Congress.

Yet here we remain in 2018 with no universal agreement on how to move forward in a balanced way. A 36% APR can work. Q-Cash Financial has delivered a fully automated digital small dollar lending platform for over 15 years to substantiate that a 36% APR is feasible. It’s feasible with the right automation. It’s feasible with the right underwriting criteria. It’s feasible with a true dedication to helping consumers caught in the struggle of everyday life.

As an industry, despite our best efforts and most polished mission statements, we often don’t fully understand the scarcity mindset of consumers caught trying to navigate their day-to-day financial lives. Helping cash-strapped consumers bridge a gap should be our calling as lenders, not just their problem as borrowers.

Let’s rally as an industry and collectively support a small dollar payday loan at 36% APR as the right way and the only way we are going to deploy a sustainable product that challenges the predatory lending marketplace to drive prices down for borrowers.

It’s time to speak out and support a 36% APR on short-term, small-dollar payday loans. Anything less, leaves millions of Americans with no other choice but to use predatory lenders.

July 16, 2018, by Ben Morales,  QCash CEO

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What is a small dollar loan?

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Outcomes Won’t Match Intentions: The NCUA Needs to Keep It Simple With Payday Alternative Loans (PALs).

Payday Alternative LoansThe third agenda item for the NCUA’s May Board Meeting is a “Notice of Proposed Rulemaking, Part 701, Payday Alternative Loans” This discussion will focus on the following:

The NCUA is preparing an amendment to the NCUA’s general lending rule to provide federal credit unions (FCUs) with an additional option to offer Payday Alternative Loans (PALs). This proposal would not replace the current PALs rule, but rather would be an alternative, with differing terms and conditions, for FCUs to offer PALs to their members. Specifically, this proposal (PALs II) would differ from the current PALs rule by modifying the minimum and maximum amount of the loans, eliminating the minimum membership requirement, and increasing the maximum maturity for these loans. All other features of the current PALs rule would be incorporated into PALs II. The proposal would also pose specific questions to solicit comments and feedback from interested stakeholders on the possibility of creating a third alterative (PALs III), which could include differing fee structures, loan features, maturities, and loan amounts

While I’m happy to see the NCUA taking action on PALs, I’m equally concerned that our friends in Washington are making things a little too complicated.

Consumers are attracted to predatory lenders for a number of reasons, not the least of which is the simplicity of both the product and the process. If we want to pull members back from these lenders, we have to match them in simplicity. I can see no advantage to the member in creating multiple PAL options. In fact, I suspect having too many choices will drive members away from credit union short-term lending, back into the welcoming arms of the (very simple) predatory lenders.

Each small dollar loan tells a story that many of us have had to experience or can at least understand. If we can just take a moment to really understand the member journey and the use cases for when a small dollar loan is needed, the product requirements would be clear, simple and lead to common-sense regulation.

At QCash Financial we have seen credit unions confused on how to apply the PAL program in conjunction with the Military Lending Act (MLA) requirements. This confusion has led to lengthy compliance reviews and many legal opinions. Just imagine if we’re forced to reconcile multiple PAL options with the MLA. I predict that credit unions will opt out and not provide the service due to the risk of non-compliance. Credit unions will lose, and so will their members. This is exactly what happened to banks about 15-years ago when regulators were very prescriptive in their small dollar guidelines.

Let’s not add more complexity to a product that is clearly in the credit unions wheel house. I urge you to send a message to the NCUA to use a common-sense approach that is based on real feedback from those credit unions who are leaders in creating financial inclusion through their small dollar loan programs.

Vote for common sense regulation and make your thoughts known. Please join the discussion below.

May 30, 2018

by Ben Morales, QCash CEO

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What is a digital lending platform?

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The Importance of Promoting Financial Health and Employee Wellness.

Financial Health and Employee Wellness

Many credit unions are responsible for the financial health and employee wellness of two employee groups: their own employees and the employees of their SEG sponsors. It only makes sense then that these credit unions should promote financial wellness among both employee groups. Financial hardship has a negative impact on employee productivity in the short-term, and eventually employees’ retirement preparedness. Employees without sufficient financial stability often turn to expensive payday loans to manage their cash flow issues, which eventually creates a cycle of debt that adversely impacts their productivity, morale and financial wellness. Credit unions are well positioned to take a leadership role in the financial wellness of both their own employees and their members.

Benefits to Credit Unions as Employers

Studies have shown that better financial wellness and employee wellness equate to increased productivity in the workplace. According to a recent study released by PwC, a quarter of U.S. workers said financial worries caused them health problems, 40% said finances distracted their work, and 15% said financial problems caused them to miss full or partial days of work.

Financial instability also impacts employees’ potential for retirement. In 2012, employees withdrew $70 billion from retirement accounts before reaching retirement age. This equates to 59 percent of employers’ matching dollars contributed to those accounts that same year. Even a one-year increase in retirement age costs employers about as much as sick and personal leave days combined. When credit unions promote employees’ short-term financial stability, it translates to cost savings when employees get closer to retirement.

What Can Credit Unions Do?

As providers of employee benefits, credit unions are viewed by their employees as trusted partners who can help them achieve financial wellness. Traditional workplace benefits programs are expanding to include new, complementary financial wellness approaches. These programs focus on foundational financial issues, such as budgeting, debt management, saving and investing, and protecting against key financial risks.

Credit unions may be familiar with offering SEGs paycheck advance programs, but many organizations are unable to support them. Alliances with trusted partners to offer employee small-dollar lending programs that provide an alternative to traditional payday lending can fill this need. More than 12 million Americans turn to payday loans annually, demonstrating a strong need for better solutions to these expensive products. Employees with access to instant liquidity solutions, such as inexpensive small-dollar loan products, are often able to budget and manage debt more effectively.

Defining These Goals
To reach financial wellness and employee wellness, consumers must first be in control of their day-to-day financial needs. This often involves creating monthly and annual budgets based on income and expenses, then limiting their expenditures to remain within the budget.

Controlling day-to-day needs also means consumers are financially prepared to cover an unexpected expense on short notice. Many times, a one-time unexpected expense of even a few hundred dollars can completely derail this financial stability, causing consumers to turn to payday lenders for their financial needs. Achieving important financial goals of saving or making the move from renting to owning a home can often get sidetracked by these unexpected expenses, which can be compounded by the cost of payday loans. This frequently causes the next unexpected expense to have an even more profound impact.

The final element of financial wellness is protecting against key financial risks, such as an economic downturn, the loss of a job or a serious illness, which is extremely difficult when consumers are living hand-to-mouth.

Short-term stability is an important element of an employee’s overall financial wellness. Employees with access to small-dollar lending solutions through their trusted credit unions have better opportunities to manage their short-term financial goals, which enables them to achieve long-term financial goals. As financially stable individuals, employees are better equipped to focus on work and can retire on time. Small-dollar lending is an important part of this equation and can have a profound impact on employees’ financial health.

May 29, 2018 By Ben Morales, QCash CEO

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How Do the New CFPB Regulations Impact the QCash Financial Platform and Credit Unions?

What are the new CFPB regulations for small dollar loans and payday lending for credit unions?

In late 2017, the Consumer Financial Protection Bureau (CFPB) finalized new regulations for small-dollar loans and payday lending.

QCash, a subsidiary of Washington State Employees Credit Union (WSECU), has engaged in conversations throughout the process, including WSECU President & CEO, Kevin Foster-Keddie who participated in the CFPB credit union roundtable. Foster-Keddie provided feedback to CFPB and shared the QCash experiences about short-term, small-dollar lending concepts as it applies to credit union members.

For QCash, the involvement in the new rule formation has been essential to understanding the impact on the platform and credit unions…

New CFPB Small-Dollar Loan Rule for Non-Covered Loans

The new small-dollar loan rule provides more regulatory guidance around non-covered and covered loans to borrowers who may be unable to pay the high fees typically attached with payday loans. CFPB cites that payday loans often force borrowers into another, short-term loan with an inability to pay, calling this process a “debt trap” for consumers.

Credit unions, however, have long provided members with Payday Alternative Loan (PAL) programs. These short-term, small-dollar loans are less costly for members than traditional payday lending.

The new CFPB rule provides a safe harbor for programs like the QCash financial platform and its non-covered loans, making it exempt from added regulatory burdens.

What is a Non-Covered Loan?

The CFPB defines a non-covered loan with an annual percentage rate (APR) of less than 36% and repayment terms that are greater than 45 days. These non-covered loans are exempt from additional regulations.

Covered loans (parameters greater than non-covered loans) will require supporting documentation from the institution, mostly focused on the borrower’s ability to repay.

QCash Automation Provides Compliance Assurance

QCash, developed before new CFPB regulations, is based on the premise that automation is necessary to deliver short-term, small-dollar loans. QCash’s automated workflow provides flexibility for credit unions to establish the methodology they choose and configure the options they want to include. The QCash Financial platform also provides an all-in-one system for required documentation.

Although the new rule doesn’t impact QCash, the financial platform supports all applicable CFPB requirements. Credit unions have the assurance that QCash provides everything needed to continue to offer compliant, short-term, small-dollar loans to its members.

May 17, 2018

by Ben Morales, QCash CEO

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