Brett T. Noll

Senior Vice President / CMO

• Customer uses post dated check as collateral• Employment is verified• Subprime credit bureaus contacted• Loan usually for 15 to 30 days• Fees up to 15% in VA• Very convenient• Very costly

What is a payday loan?

Payday Loan Locations

• Payday Lending Stores• Check Cashing Outlets• Pawn Shops• Call Centers• Internet

Payday Users

• 2/3 under 45 years old• 62% female with children under 18 living at

home• Employed (50% in job less than 3 years,

23% in current job over 5 years)

Payday Loan Customer Profile

• Single parent families with low income• Young adults• Minorities/immigrants• People lacking money management skills• Anybody!

Astounding Statistics

• 22,000 payday lenders nationwide• Estimated $6 to $8 billion dollars in fees last year• Estimated 17% of military use payday loans (225,000

personnel)

Astounding Statistics• In 2003, more than 250,000 Virginia consumers received more

than one payday loan.*

• In 2003, 124 payday lending stores opened in Hampton Roads.**– 40 Virginia Beach

– 36 Norfolk

– 26 Newport News

– 20 Hampton

• The VA Bureau of Financial Institutions reports that 1/3 of the total statewide payday lenders reside in the Hampton Roads area.***

Sources:

*Better Business Bureau Serving Western Virginia Consumer Alert: Virginia Data Proves Payday Loans Equal Costly Cash. June, 2004.

**Flagship News. It’s Hard To Break Free From Payday Lending Trap. http://www.flagshipnews.com. June 19, 2003

***The Virginia Pilot. Payday Lenders Expect Booming Business Here Military Presence, Tight Incomes And A New State Law Help Draw Short-term Loan Firms to Hampton Roads. October, 2002.

Why are Payday Lenders popular?

• Better hours• Better locations• Provide what people need, fast• No hassle• Sometimes better than bouncing checks???• Sometimes better than late payments???• No alternatives???

Developing A Solution – A Six-Step Process

1. Identify The Need2. Benchmark 3. Shop The Competition4. Develop Differentiated Product5. Brand The Product6. Get The Word Out (July, 2004)

Payday Lending Comparison

Lender Fee Term APR 7 DAYS

PAYDAY LENDER $15 per $100 $500, 7 day term 780% - $75

LFCU QuickCash N/A $500, 7 day term 18% - $1.73

Approval Criteria

• Borrower must have been an LFCU member for at least 180 days at time of application

• Borrower must have had direct deposit of their payroll

• Or, has had a QuickCash loan with LFCU in the past and repaid as agreed

Branding Your Product

• Naming Your Baby• Playing Tag With Taglines• The Color of Money

Newspaper Advertisement

Mass Transit Advertising

Full Bus Wrap Large Bus Poster

Additional Advertisement

Teller HandoutAir Force Base

Educational Handout Press Release

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Factors In Building Your Payday Loan Alternative Model

• Annual Fee• Pricing• Direct Deposit Requirement• Forced savings• System Notification for Repeat Borrowers• Financial Counseling• Staff Training• Go back to what people like in payday lenders - does

your program fit the bill?

Setting up products to complement your alternative

• Starter Platinum• Line of Credit• Share Secured Loans• Financial Counseling• CreditBuilder• Langley Saves

LFCU Product Success

Guess how many loans per month we average today

Product Success

To date LFCU has processed almost 16,000 loans & disbursed over 9 million dollars

Product Success

Since July, 2004, we’ve saved our members over $1.2 million in fees they would have otherwise incurred had they borrowed at Payday Lenders

Proposed legislative ideas in Virginia

-Capping interest rates-Limiting the number of payday loans a person can have to 3-Allowing a day to pass before a consumer can take out another payday loan after paying off the first

The Payday Lending Industry fights state legislation.

What happens when you call an internet lender?

Thanks largely to payday lenders, the 2007 John Warner Department of

Defense Authorization Act contains language that could ultimately have an

adverse affect on any financial institution serving the military.

Defense Authorization Act:- Identifying active duty military and immediate family (includes

Reserves and National Guard)- A 36% rate cap on loans inclusive of optional fees, charges for

services, and late charges - 2 separate APRs??- Excludes refinancing- Requirement of oral disclosures- Prevents Car Title Loans- As worded, could prevent payroll deduction as means of

payment- Severe sanctions of imprisonment for rule violation

You might have a Payday Lending problem if…

- Your member’s average APR is higher than Derek Jeter’s batting average

- There are more payday lenders popping up in your community than Starbucks

- Results of your annual member survey show that Cash Advance America is your members’ Primary Financial Institution

- Payday lenders ask to lease space in your buildings- You start seeing Board members’ cars in payday lender

parking lots!!!

Thank You