Credit unions have an chance to fulfill certainly one of their members’ unmet needs through small-dollar lending solutions. Members frequently turn to payday lenders to deal with their short-term lending needs, rather than engaging using their credit union of these services. Members turn to sources beyond their credit union due to the fact very few lending institutions are presently offering these product types. One of the leading reasons credit unions have not adopted these items is fear. The 4 primary fears which cause credit unions to avoid providing small-dollar lending services would be the financial risk of implementing a new product; pending regulatory changes proposed by the CFPB; potential reputational risk; and draining savings. While these fears are incredibly common in the credit union community, they’re easily overcome.
1. The financial risk of implementing a new product.
Many lending institutions hesitate to launch a small-dollar loan product due to the perceived financial risk. Adding a new product can have certain initial costs, such as the requirement for additional staff. However, the right solution covers itself inside a short period of time, and fully automated loan technology can get rid of the need for additional staff members. Credit unions have the opportunity to look to those proven methods to find guidelines to prevent any financial loss, when launching small-dollar lending solutions.