If payday lenders disappear, will Americans survive?


April 23, 2018

Ann Flannigan, Vice President of Human Resources, WSECU

According to a recent survey conducted by CareerBuilder, eight out of 10 Americans live paycheck to paycheck. They are not able to save money for an unexpected expense. Most financial advisors recommend three to six months of living expenses in a savings account. Yet, 35% of Americans have fewer than $500 in savings.

If Americans are living paycheck to paycheck and have less than $500 in savings, what happens if there’s an emergency that costs them at least $1,000? With payday lenders shutting down and being subjected to such strict regulations, how will Americans survive?

It’s a fair question. But there’s a good reason regulators are requiring new payday loan regulations.

How payday loans work

While payday loans certainly fill a valid consumer need, it’s important to consider the loans’ long-term effect on borrowers. In an actual emergency, people are desperate for money and won’t necessarily read (or think about) the fine print. Or even if they do read the fine print, they’re willing to accept terms they wouldn’t under normal circumstances. After all, if they’re facing a medical emergency, they’re more concerned about your health or the health of their family member or beloved pet than negotiating a contract that discloses the interest rate or the fees associated with renewing the loan.

If they have a $700 emergency or unexpected expense, maybe they could have managed to pay that out of their next paycheck. But a $700 payday loan doesn’t just cost $700. There’s interest to pay. On average, a payday loan has somewhere between a 400% and 790% interest rate. What’s 400% of $700? The answer is $2,800. Over the course of a year, if a borrower kept renewing the loan, it would cost them almost $3,000. And that’s just the low end of the interest scale – we don’t have to show you the math for an annual 790% interest rate to make that point.

When payday loans are renewed, the lender often requires the borrower to pay a renewal fee as well. Yet, many borrowers don’t recognize that interest rate is also accruing on the amount owed. Depending on the structure of the payday loan, it can only be renewed so many times before the lender takes the full payment, usually via ACH out of the borrower’s bank account. While this helps stop people from going further into debt because of interest, the full amount is usually a shock to the borrower.

CFPB regs explained

The Consumer Finance Protection Bureau (CFPB) released new rules in 2017 regulating payday loans, auto title loans, and advance deposits that require full payment, because they leave borrowers in an even worse financial situation. These borrowers are already stretched to their financial limits. Requiring them to repay payday loans in full usually means they no longer have the ability to pay for groceries, electricity or rent.

Of course, predatory payday lenders are well aware of this conundrum. In fact, it’s the cornerstone of their profitable business model. Once a customer, always a customer.

Under new CFPB regulations, in states where payday lending is legal, lenders must now use a repayment test known as the “full-payment test.” It requires proof of income from borrowers, and also limits the number of payday loans to no more than three loans “in quick succession.”

Lenders are also required to use credit reporting systems registered through the CFPB to get information and report the loans they’re funding.

There’s one exception to the new rule: Consumers borrow up to $500 without passing the full-payment test if the loan allows the borrower to repay it over time, in installments. However, if the borrower has an outstanding payday loan, recently took out a payday loan, or has an outstanding balloon payment loan, they cannot be approved for an additional payday loan under this exception.

QCash bridges the payday loan gap

Credit union members have an alternative to traditional predatory payday loans. QCash is a short-term loan solution in which borrowers can conveniently apply online with no credit check. With QCash, borrowers can apply to receive an instantly funded, short-term loan of up to $700. Installment payments are automatically drafted each month from their credit union or bank account.

The interest rate on Q-Cash is significantly lower than traditional payday loans. With Q-Cash, borrowers pay just $12 for every $100 they borrow. That’s around 12% interest each year. So, a $700 Q-Cash loan would cost around $784. Compare that to our $700 payday loan example above that cost $2,800.

QCash Plus is available for borrowers who need more short-term loans between $701 and $4,000. The interest rate for QCash Plus is 36%. The application process for QCash Plus is very similar to that of QCash. It’s done online. There’s no credit check. However, there is a $25 application fee.

If approved, the borrower’s account is instantly funded. Repayment is the same as with QCash: Each monthly payment month is automatically deducted from the borrower’s account.

The goal of QCash and QCash Plus is to provide credit union members with a way they can meet their short-term needs without taking out dangerous payday loans. Our solution ensures that Americans will not only survive short-term financial needs, they will thrive long term.

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Are QCash loans really good for borrowers?


April 19, 2018
By Heidi Tinsley, Program Director

One of the most common questions we hear from credit union and bank executives concerns how borrowers use QCash loans. Payday lending has a very negative reputation, but we’ve found those who irresponsibly use small dollar loans are the exception, not the rule.

The reality is that consumers use QCash loans to meet all sorts of needs we never imagined. At the core, they are looking for quick decisions, without judgment, and fast fulfillment to get them out of an embarrassing or unexpected situation.

For any situation in which borrowers are in need or experiencing a family crisis, QCash can help. Two of our borrower’s most common needs are emergency vet bills and kids are starting school. In particular, oftentimes parents are helping send their kids off to college and encounter textbook sticker shock or face other unexpected expenses. In any case, borrowers need money quickly. QCash allows them the freedom to take out small-dollar loans in an easily accessible and user-friendly way.

QCash also gives credit unions and banks a means to provide small-dollar loans to their customers in a way that uses technology to make the transaction efficient and confidential.

Without QCash technology, these consumers aren’t using credit union lending options to meet immediate or embarrassing borrowing needs; instead, they are going to payday lenders or car title lenders, where they paid unreasonable fees. These lenders charge predatory rates and fees because they know borrowers are under duress and are willing to pay whatever it takes to get funds fast. WSECU analyzed member borrowing data and determined QCash could substantially help members by speeding up the process, lowering rates and delivering a CFPB compliant solution that meets modern consumer experience expectations.

QCash not only saves consumers money, it grows credit union and bank customer bases and reinforces brand loyalty. And, borrowers are more likely to repay their credit union or community bank over payday lenders.

QCash small-dollar loans provide borrowers with a reasonably-priced, fast and confidential financial safety net for when life sends an unwanted financial burden their way. That’s something we’re very proud of and we’d love to share this solution with more caring community lenders!

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How QCash made CFPB lending regs credit union friendly


April 17, 2018

By Kevin Foster-Keddie, CEO of WSECU

If you work for a financial institution and have concerns about both the public perceptions of payday lending and the compliance challenges – this article is for you.

Although the CFPB is in a state of flux now, just a few years ago the bureau was writing new payday lending regulations that had the potential to prevent credit unions from meeting their members’ small-dollar lending needs.

I personally wanted to get involved with the CFPB, because in my experience, if you have a seat at the table with the decision makers, you can be persuasive about your position and help influence regulation. At the end of the day, the regulation is going to happen. You have to be there if you want to influence its direction. That’s why I joined the CFPB’s Advisory Council, even though the bureau – any federal agency, really – didn’t have a reputation for being innovators. In fact, they had a reputation for writing regulations that prevented financial institutions, even good players like credit unions, from serving members the way they would like to.

Richard Cordray, who was CFPB director at the time, is a relatively open-minded person, and is also very technologically astute. Thanks to those qualities, payday lending regulation outcome turned out better for QCash and our product than I ever imagined.

The current regulatory framework supports regulators who believe technology can help solve consumer protection problems, if used effectively. The CFPB is very open to technology, but they want it applied within certain constraints. If you can design a path forward, they are willing to work with you.

That’s what we tried to do with the CFPB and QCash.

While I participated in the CFPB’s Advisory Council, we talked about a lot of different things. But when we began talking about Qcash, I found it was really important to educate the CFPB not only with inspirational stories but also with data.

QCash’s digital lending platform made it easy.  Our members love QCash and are happy to share endless stories about the positive impact we’ve had on their lives. And, we can pull data out of the QCash digital lending platform to back up and quantify those stories.

It isn’t about making a buck off the member, but instead about the impact small dollar lending has on our members’ day-to-day lives. Small dollar lending is core to the mission and purpose of a credit union. QCash just lets us do that digitally, in a modern world with a modern cost structure.

As the CFPB began to write new rules for payday lending, I was sitting at the table and they asked me questions. I told them inspirational stories and also provided data. Through our involvement, we were able to create an environment in which they adopted a rule that is consistent with the QCash program.

Part of that was because we were convincing in making our case. Our influence is apparent in the fee they allowed financial institutions to charge, the exclusion of the 36% rule, the exclusion certain term lengths that perpetuate predatory lending structures … those were all things we advocated for, and the CFPB listened.

At the end of the day, because we were a part of the council, we were able to influence the CFPB’s regulatory framework. We created a huge lane for credit unions on the payday lending highway, and QCash is proudly driving down that lane, helping members along the way.

The rule gave credit unions and other financial institutions and advantage, and put payday lenders at a disadvantage. That sounds like a happy ending to the story, doesn’t it? Well, we’re not stopping there. We’re actually working with payday lenders to see if they can use our QCash product to continue to make short-term, small dollar loans that actually help consumers.

The CFPB wrote thoughtful regulation that didn’t completely eliminate small dollar lending. With our technology, our tools, the data analytics and mobile cloud technology, QCash can to provide great margins for institutions, and a great deal for members.

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QCash: How it all started

One of the most common questions QCash gets is why did WSECU start QCash? 

April 12, 2018

By Ben Morales

How did QCash begin? It’s an excellent story about a front line employee living the motto of people helping people.

Our story begins when a teller at Washington State Employees Credit Union, the credit union that owns our CUSO, that members were coming into the branch repeatedly for money orders. Money orders aren’t anything to be concerned about, but our teller noticed one very important thing: those money orders were then used to write other money orders to payday lenders.

 We didn’t know anything about payday lending at the time, but thanks to WSECU’s empowered culture, the teller told the credit union CEO about what she observed. Our CEO then put together a small group of big, bright minds to figure out what was occuring and how WSECU could help.

What the credit union discovered was its members were using predatory payday lenders to meet their short-term, small-dollar needs. WSECU decided they not only needed to help their members, but short-term lending was something credit unions could and should do.

And, not only can WSECU short-term, small-dollar loans save members money, they can simultaneously create a new, revenue stream for the credit union.

And so, 14 years ago, QCash was created to provide short-term, small dollar loans to WSECU members.

As QCash began to gain local market share, the credit union began to wonder, “if we are changing the payday lending landscape in the state of Washington, where else could we go? How might we be able to share this with the credit union community and change the landscape across the country?”

WSECU didn’t know the answer to that question, but decided to give it a shot. And so, in April 2015, QCash Financial was born and began delivering short-term, small dollar loans to other credit unions and banks, in hopes of meeting the needs of other consumers the same way WSECU has helped its members.

And that’s the story of how QCash has grown from one teller’s thoughtful observation to a CUSO that has sparked a short-term, small dollar lending movement.


Ben Morales is the CEO of QCash Financial. QCash Financial is a CUSO providing automated, cloud-based, omni-channel small-dollar lending technology that enables financial institutions to provide short-term loans quickly to the people they serve. QCash Financial, a wholly owned subsidiary of WSECU in Olympia, Wash., started as a short-term loan solution for the credit union’s members in 2004.

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If Not Us, Who? Reacting to the CFPB Decision on Payday Lending

Reaching Out

By Ben Morales, CEO of QCash Financial [12.11.2017]

The CFPB recently released its finalized payday lending rule that will make it very burdensome for lenders to offer loans with an interest rate higher than 36 percent APR and with a loan term shorter than 45 days after July 2019, when the rule goes into effect. This ruling will have a profound impact on the current state of the payday lending industry and on the millions of consumers who rely on these loans to help them manage through often challenging financial circumstances. As payday loans become less available, consumers will need an alternate source for their small-dollar loan needs.

As a result of the ruling, approximately 18,000 payday lenders will be directly impacted. These payday lenders will either need to drastically change their business models, or leave the market place. As it stands, many of these payday lenders will not find their businesses profitable under the new regulations and will likely go out of business entirely; however, the consumer need for these  products will not go away. Consequently, the tens of millions of consumers that regularly apply for payday loans in a single year will be forced to find alternative sources for their liquidity issues.

The potential impact of the sudden loss of access to payday loans could be devastating to consumers, but also to communities. As communities lose access to traditional payday lending products, those who will be most impacted are the large groups of consumers who fall into the working poor category: people who spend 27 weeks or more in a year in the labor force either working or looking for work, but whose incomes fall below the poverty level (Center for Poverty Research). These individuals, who may not have access to traditional lending services or may not have the credit scores to qualify for these products, will begin to have to make hard decisions about where to allocate limited resources.  For example, with limited budgets, consumers will have to decide where to spend money when faced with housing, healthcare, transportation and food expenditures that exceed their incomes. If a consumer puts off necessary car repairs, then suddenly has a broken-down car, this impacts his transportation for work, and jeopardizes his income. Similarly, if a consumer is forced to forgo buying healthy groceries in order to pay her rent, her long-term health may be impacted, and her ability to work. Without access to small-dollar loan products, these consumers may be forced to risk their long-term financial stability, which in turn impacts local economies when multiple families are unable to pay their day-to-day expenses.

In order to address the sudden lack of payday loans when the industry responds to the CFPB regulation, trusted financial institutions should offer compliant small-dollar loans to their communities. By leveraging automated technology for greater efficiency, financial institutions can become a trusted resource for inexpensive loans to their communities. Without access to instant liquidity options in the marketplace, many communities will begin to suffer as consumers are unable to stretch their budgets to cover their expenses. Replacing payday loans with compliant, reasonably-priced alternatives will help the working poor consumers thrive, instead of irrevocably weakening the millions of households that currently turn to payday loans for their needs.

If not us, who? If not now, when?


Ben Morales is the CEO of QCash Financial. QCash Financial is a CUSO providing automated, cloud-based, omni-channel small-dollar lending technology that enables financial institutions to provide short-term loans quickly to the people they serve. QCash Financial, a wholly owned subsidiary of WSECU in Olympia, Wash., started as a short-term loan solution for the credit union’s members in 2004.

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The Four Elements of Financial Well-Being

Four Elements of Financial Well-Being
By Ben Morales, CEO of QCash Financial [12.11.2017]

The CFPB recently published a report titled “Financial Well-Being in America” that discusses the four elements of financial well-being, and how Americans of different income levels display varying levels of financial wellness. Two of the CFPB’s most important conclusions from the study are that “savings and financial cushions provide the greatest differentiation between people with different levels of financial well-being” and that “certain experiences with debt and credit seem to be strongly—and negatively—associated with financial well-being.” Credit unions must understand the four elements of financial well-being and how to help improve the borrowing and saving experience for members to help boost their financial wellness.

The report “Financial Well-Being in America” defines financial well-being as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life.” It further describes the four characteristics as the following:

  • – Present Security: Control over day-to-day and month-to-month finances
  • – Present Freedom of Choice: The freedom to make choices to enjoy life
  • – Future Security: The capacity to absorb financial shock
  • – Future Freedom of Choice: The state of being on track to meet financial goals

These four elements address present stability in two categories, which directly impact future financial stability. Members must first be able to keep their daily or monthly expenses in line with their income, in order to save for unexpected expenses in the future and meet financial goals that improve quality of life, such as saving for a home or investing in a more reliable form of transportation.

To help members improve their financial well-being, credit unions can provide members access to tools to control day-to-day and month-to-month finances by borrowing and saving more effectively. Members often need access to the ability to borrow to manage daily and monthly expenses. Inexpensive, small-dollar loan products can help stabilize members in the short-term. Without these alternative loan options, many members risk falling into a cycle of debt through high-interest payday loans or by accruing large credit card balances with high interest rates. Credit unions are uniquely positioned to offer these small-dollar loan solutions to members because they are invested in the long-term financial stability of members, instead of looking for a quick profit.

In order to improve a member’s financial stability enough to start saving, credit unions need to build support for savings. Integrating financial coaching and debt-management counseling services into small-dollar loan products can help members make good decisions throughout the borrowing process. The ability to borrow strategically can directly lead into the ability to save, especially with the guidance of trusted credit union financial coaching professionals.

When members turn to a small-dollar loan product offered by a credit union to solve a short-term cash management crisis, the credit union has the opportunity to offer help to build a savings plan once the member’s income has stabilized.

The CFPB’s report on financial well-being indicates that access to savings and financial cushions is one of the primary indicators of financial wellness and stability. Credit unions should work with their members who struggle with their day-to-day and month-to-month expenses to build a plan to stabilize their income and expenditures. By offering access to small-dollar loan products, paired with financial coaching and savings tools, credit unions can help members improve their financial well-being.


Ben Morales is the CEO of QCash Financial. QCash Financial is a CUSO providing automated, cloud-based, omni-channel small-dollar lending technology that enables financial institutions to provide short-term loans quickly to the people they serve. QCash Financial, a wholly owned subsidiary of WSECU in Olympia, Wash., started as a short-term loan solution for the credit union’s members in 2004.

As published by:

CUNA Councils
P.O. Box 431
Madison, WI 53701-0431
Phone: (800) 356-9655

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The Importance of Promoting Small-Dollar Lending and Employee Wellness

By Ben Morales, CEO of QCash Financial

In a recent Prudential survey regarding consumers’ perspectives on financial wellness, only 22 percent of individuals in the United States described themselves as feeling financially secure. Employers such as credit unions have a stake in this because the impact of employee financial instability does not stop at the company door. Many credit unions were and continue to be founded to serve groups of people who had a common interest or bond, such as an employer. These were called select employer groups (SEGS). Promoting employees’ and SEGs’ financial wellness should be an important business objective for credit unions, since it 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.

Benefits to credit unions as employers

Many credit unions and employers in general are unaware of the potential benefits of promoting employees’ financial wellness. According to Prudential, studies have shown that better financial wellness equates to increased productivity in the workplace. Roughly 44 percent of employees worry about finances at work, and 46 percent spend between two and three hours a week on personal financial matters; see “Power of the Wellness Effect” . Financial instability also impacts employees’ potential for retirement.  In 2012, employees withdrew $70 billion in from retirement accounts before reaching retirement age. This equates to 59 percent of employers’ matching dollars contributed to those accounts that same year; “Power of the Wellness Effect“. 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 employees 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. According to PEW Charitable Trusts, 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

In order to reach financial 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 employees’ 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.


Ben Morales is the CEO of QCash Financial. QCash Financial is a CUSO providing automated, cloud-based, omni-channel small-dollar lending technology that enables financial institutions to provide short-term loans quickly to the people they serve. QCash Financial, a wholly owned subsidiary of WSECU in Olympia, Wash., started as a short-term loan solution for the credit union’s members in 2004.

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