September 19, 2014
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Understanding credit options

To the Editor:

This is in response to your recent article you ran on April 26, 2012.

State Rep. Frank Ferri’s assertion that “Banks can’t do it. Credit unions can’t do it. Only these companies can” is simply incorrect (“Legislation to cut payday loan interest rates praised, scorned,” April 26, 2012). The fact is banks can and do offer short-term credit – and at higher rates than payday loans.

Increasingly, regulators and independent researchers, including the Federal Reserve Bank of New York, find that overdraft programs and direct deposit advances are similar in nature to payday loans and are used interchangeably by consumers. Whether based on APR comparisons or actual dollar cost, a payday advance is less expensive – often far less expensive – than these programs. Consider just one example: the average check overdraft within the United States is $66, for which, on average, banks charge a fee of $36. That’s an APR of over 2,000 percent. At my company, Check ’n Go, a customer can borrow that same $66 for $6.60.

Perhaps Rep. Ferri is also unaware that payday loan customers must have a bank account to qualify for credit. When facing a financial shortfall, our customers have a variety of options to choose from, including credit cards, overdraft programs and cash advances from banks, credit unions and retail lenders. They choose our service because it’s simple, reliable, transparent and competitively priced. It helps them manage unexpected and periodic financial difficulties.
Rep. Ferri should not be so quick to take credit options away without understanding the cost of the alternatives.

Douglas R. Knight Jr.
Director of Operations,
RI Check ’n Go


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