Small Dollar Loan Showcase: Taking Care of the Caregivers

Providence Federal Credit Union steps up with a payday alternative loan to help members through emergencies and into a brighter future.

2/19/2019

Woman sitting by a laptop.

Shirley Cate, President and CEO of Providence Federal Credit Union, demonstrates how to use the Caregiver loan portal online.

Payday loan stores are ubiquitous. According to the St. Louis Federal Reserve, there are more of them dotting the landscape than there are McDonalds—by a big margin. According to the Consumer Financial Protection Bureau, 12 million Americans fall into the payday trap each year, often spending $520 in fees to borrow only $375.

As consumers with poor credit struggle to survive the predatory cycle, credit unions step up with more affordable alternatives. One example is Portland-based Providence Federal Credit Union.

Healthcare workers who are Providence FCU’s members help patients and their families during frightening experiences and dark days, but who takes care of the them when they have a financial emergency? Providence FCU’s payday alternative “Caregiver” loan offers interest rates far lower than the 153 percent Annual Percentage Rate some payday lenders are allowed to charge under Oregon law on short term small dollar loans. Through a partnership with Providence St. Joseph Health, the credit union’s Caregiver loan is similar to  the Filene Research Institute’s Employer Sponsored Small Dollar Loan  program. The rate on the loan is 14.99 percent for terms of 90 days to one year. If the member opts for direct deposit to their savings account, the interest rate could be reduced to as low as 9.99 percent. Financial counseling is also part of the program.

“We know that the need is there. We know that the employees like this type of product,” said Shirley Cate, President and CEO. “The Caregiver loan is all about whether the member can afford it, and we do everything in our power to help them.”

Since Providence St. Joseph Health introduced the loan to its employees in January 1,000 have already visited the online portal, and nearly 50 have applied for loans of up to $1,000.

The online calculator allows members to estimate their loan needs, how much they can save, and how much they can pay back each pay period. It estimates how much they will have in savings when their loans are paid off. The application automatically triggers the credit union’s financial counselor, who connects with the members to help them identify opportunities for responsible budgeting.

“We do this loan just for financial hardships and emergencies and our main goal with this is to make sure the member gets help and also has the ability to save money so they have something to fall back on, and get used to saving,” Cate said.

Editor’s note: Does your credit union offer an innovative small dollar or payday alternative loan you’d like to share with Anthem? Please contact Lynn Heider. [email protected].