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LendUp Launches in Texas; One CEO Believes Credit Unions Make Better Financial Partners
Friday, July 25, 2014 6:40 AM

Last week, LendUp launched in Texas and is positioning itself to “help” thousands of borrowers move out of payday loans with its technology platform. In a July 23 press release, LendUp said it sees Texas as an important market, as an FDIC survey finds that 36 percent of Texas households have used an alternative financial service in the last year, including unbanked and underbanked households. Rivercity FCU President and CEO Kim L. Heinze tells the Leaguer there is unfortunately a market for businesses such as this.

“Consumers who turn to payday lenders do so when there is a sense of urgency,” she notes. “Their focus is on meeting that immediate financial need, and they aren’t necessarily focused on what it’s going to cost them in the long-run, or the sometimes far-reaching impact that decision will have on their financial well-being.”

On LendUp’s website, consumers can quickly ascertain the cost of a payday loan. The average payday loan is around $380. A $380 loan with LendUp would cost the borrower $96.55 in interest if they paid it off in 14 days – that is an APR of 662.42 percent.  

“There are a lot of consumers that don’t understand what APR means to their pocketbook. As credit unions, we need to do more to educate consumers, and we need to deliver this financial education on the channels they’re using, such as a mobile app and/or home banking platform,” adds Heinze.

“We also need to do more to break the cycle. There are consumers, including credit union members, who abuse overdraft protection,” continues Heinze. “Overdraft protection is a convenience product that is of benefit to consumers, as long as it’s used responsibly.  Regretfully, too many members become dependent on it.”  

Texas is the third state in which LendUp has launched just this month, following Illinois and Idaho. The online lender has been rapidly expanding in 2014. In Texas, Illinois, and Idaho, LendUp will reportedly deploy customized versions of the LendUp Ladder, a personalized path designed to provide actionable steps for borrowers to access larger loans, at lower rates, over time. For example, each time a borrower repays a loan on time, they earn points. If they refer a friend, they earn points. Take an education course, and earn points. As consumers earn more points, they ascend in status from Silver, to Gold, to Platinum, to Prime.

Consumers do need a financial partner, but instead of a non-traditional service provider, Heinze believes credit unions are the best partner as our business model puts “people over profit.”