Brett T. Noll

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• Brett T. Noll
• Senior Vice President / CMO

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What is a payday loan?

• Customer uses post dated check as collateral
• Employment is verified
• Subprime credit bureaus contacted
• Loan usually for 15 to 30 days
• Fees up to 15 in VA
• Very convenient
• Very costly

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Payday Loan Locations

• Payday Lending Stores
• Check Cashing Outlets
• Pawn Shops
• Call Centers
• Internet

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Payday Users

• 2/3 under 45 years old
• 62 female with children under 18 living at home
• Employed (50 in job less than 3 years, 23 in
  current job over 5 years)

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Payday Loan Customer Profile

• Single parent families with low income
• Young adults
• Minorities/immigrants
• People lacking money management skills
• Anybody!

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Astounding Statistics

• 22,000 payday lenders nationwide
• Estimated 6 to 8 billion dollars in fees last
  year
• Estimated 17 of military use payday loans
  (225,000 personnel)

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Astounding Statistics

• In 2003, more than 250,000 Virginia consumers
  received more than one payday loan.
• In 2003, 124 payday lending stores opened in
  Hampton Roads.
• 40 Virginia Beach
• 36 Norfolk
• 26 Newport News
• 20 Hampton
• The VA Bureau of Financial Institutions reports
  that 1/3 of the total statewide payday lenders
  reside in the Hampton Roads area.

Sources Better Business Bureau Serving Western
Virginia Consumer Alert Virginia Data Proves
Payday Loans Equal Costly Cash. June,
2004. Flagship News. Its Hard To Break Free
From Payday Lending Trap. http//www.flagshipnews.
com. June 19, 2003 The Virginia Pilot. Payday
Lenders Expect Booming Business Here Military
Presence, Tight Incomes And A New State Law Help
Draw Short-term Loan Firms to Hampton Roads.
October, 2002.
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Why are Payday Lenders popular?

• Better hours
• Better locations
• Provide what people need, fast
• No hassle
• Sometimes better than bouncing checks???
• Sometimes better than late payments???
• No alternatives???

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Developing A Solution A Six-Step Process

• Identify The Need
• Benchmark
• Shop The Competition
• Develop Differentiated Product
• Brand The Product
• Get The Word Out (July, 2004)

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Payday Lending Comparison
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Approval Criteria

• Borrower must have been an LFCU member for at
  least 180 days at time of application
• Borrower must have had direct deposit of their
  payroll
• Or, has had a QuickCash loan with LFCU in the
  past and repaid as agreed

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Branding Your Product

• Naming Your Baby
• Playing Tag With Taglines
• The Color of Money

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Newspaper Advertisement
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Mass Transit Advertising
Full Bus Wrap
Large Bus Poster
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Additional Advertisement
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Weekly Loan Activity
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Factors In Building Your Payday Loan Alternative
Model

• Annual Fee
• Pricing
• Direct Deposit Requirement
• Forced savings
• System Notification for Repeat Borrowers
• Financial Counseling
• Staff Training
• Go back to what people like in payday lenders -
  does your program fit the bill?

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Setting up products to complement your
alternative

• Starter Platinum
• Line of Credit
• Share Secured Loans
• Financial Counseling
• CreditBuilder
• Langley Saves

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LFCU Product Success

• Guess how many loans per month we average today

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Product Success

• To date LFCU has processed almost 16,000 loans
  disbursed over 9 million dollars

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Product Success

• Since July, 2004, weve saved our members over
  1.2 million in fees they would have otherwise
  incurred had they borrowed at Payday Lenders

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Proposed legislative ideas in Virginia

• Capping interest rates
• Limiting the number of payday loans a person can
  have to 3
• Allowing a day to pass before a consumer can take
  out another
• payday loan after paying off the first

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The Payday Lending Industry fights state
legislation.
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What happens when you call an internet lender?
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Thanks largely to payday lenders, the 2007 John
Warner Department of Defense Authorization Act
contains language that could ultimately have an
adverse affect on any financial institution
serving the military.
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Defense Authorization Act

• Identifying active duty military and immediate
  family (includes Reserves and National Guard)
• A 36 rate cap on loans inclusive of optional
  fees, charges for services, and late charges
• 2 separate APRs??
• Excludes refinancing
• Requirement of oral disclosures
• Prevents Car Title Loans
• As worded, could prevent payroll deduction as
  means of payment
• Severe sanctions of imprisonment for rule
  violation

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You might have a Payday Lending problem if

• Your members average APR is higher than Derek
  Jeters batting average
• There are more payday lenders popping up in your
  community than Starbucks
• Results of your annual member survey show that
  Cash Advance America is your members Primary
  Financial Institution
• Payday lenders ask to lease space in your
  buildings
• You start seeing Board members cars in payday
  lender parking lots!!!

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• Thank You