Utah credit unions that have ventured into the troubled waters of payday-type loans say they are just meeting the demand of specific customers.
That is the same kind of logic that banks used when giving $750,000 home loans to migrant farmworkers.
And we all know the results of that business practice.
Hyperbole aside, we are troubled by this new development.
A report by the National Consumer Law Center this month indicates that eight Utah-based credit unions, two in the Top of Utah, are now offering "predatory payday lending type products to their members."
One of these credit unions quotes an annual percentage rate as high as 876 percent.
Gerry Oborn, marketing director for Alliance Credit Union in Ogden, said the product her institution is offering is designed to serve a certain high-risk population.
"We would always, always try to seek an alternative way for a member to get the very best rate that they can," she said.
As we have stated in the past, payday loans trap vulnerable consumers in a perpetual cycle of debt. We feel that way whether the loans are offered by an established financial institution or a shady operation in a strip mall.
One particular group vulnerable to payday loans are military personnel and their dependents. Because of the mobility of this population, military families sometimes find themselves short of cash after relocating or when a deployment occurs. Hill Air Force Base officials have cautioned personnel about relying on such loans.
With credit unions now in the game, we hope military personnel aren't deceived into thinking these loans are different than those payday lending stores offer.
The credit unions cited in the report are federally chartered and not examined by the state. But they are still required by Utah law to disclose their rates.
Jerry Jaramillo, supervisor of savings and loans and trusts at the Utah Department of Financial Institutions, said his department strives to help consumers make good decisions on their interest rates.
Always ask about the interest rates. Consumers need to realize that you can dress a goat up in a tuxedo. But in the end it is still a goat.
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