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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: May 29, 2013

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The CEO of Louisiana Federal Credit Union recently defended her credit union’s lending of payday loans.

Her defense of the credit union’s cash advance products came in response to an accusatory letter from the National Consumer Law Center and the Center for Responsible Lending.

According to the letter, LouisianaFCU charged its customers triple digit interest rates.

In response to such accusations, Rhonda Hotard, the CEO of Louisiana Federal Credit Union, fired back that her credit union only lends out 175 payday loans each month. This generates $30,000 per year — hardly making the credit union a cash advance industry juggernaut.

Hotard told that her credit union has offered payday loans since 2008. However, only now has the National Consumer Law Center and the Center for Responsible Lending seen it fit to critique her credit union’s modest payday loan products.

Despite this, she views other lenders as competition within the lending industry.

“We do view payday loan stores and payday loan websites as competitors simply because they also offer a short term solution to meet ‘our’ members’ needs,” she said. “However, the cost of the solution provided by others far exceeds what our members would pay using the product that we offer.  In light of the fact that there are approximately 10 payday stores within a 1.5 mile radius of our largest branch, I would say that the competition is fierce.” 

Hotard said that public negativity against cash advances is unfounded. She explained that in reality, the overwhelming need for a short-term loan is generally from individuals that find they fall short of money near a payday for reasons beyond their control.  Cash advance lenders generally make the process fast and easy, therefore people are more likely to feel comfortable using them.

She felt it was unfair to lump her federal credit union in with the whole host of the diverse payday loan industry. Namely, her cash advance products are unique compared to those found at most retail lending stores.

“First of all, you must be an established member of our Credit Union and meet certain criteria to qualify,” said Hotard. “We charge an application fee on ALL loans, regardless of approval.  Our interest rate is 15% and there are no other hidden costs or fees for our members.  We encourage our members to receive financial counseling and often try to work with them to develop a long term strategy instead of seeking a short term solution.” 

Hotard explained that once members borrow payday loans, they are given budgeting techniques and money management advice in order to help get them out of a cycle of debt.

“Our payday loan program has never been intended to be a profit center and is only being offered because we recognized that there was a need within our membership,” she said. “We started the program as a way to get our members to come to us for their financial needs instead of seeking higher cost alternatives.”

Hotard said that her credit union offers a number of long-term solutions that can help customers at the fraction of the cost of a cash advance.

“We can do consolidation loans and help people to improve their overall financial situation,” she said. “We try to save members as much money as possible on monthly debt so that they will have a more secure financial future.”