Not all credit union loans are equal

A watchdog group said some credit union loans approach terms equivalent to payday loans, which allow U.S. workers to borrow against their next paycheck.

Laureen Saunders, a lawyer at the National Consumer Law Center said some short term credit union loans are only marginally cheaper than traditional payday loans, USA Today reported Monday.

For example, the Nevada Federal Credit Union charges a fee of $70 for two-week loans of up to $700, the newspaper said.

While the credit union charges no interest for the loan, the fee generates the same income for the bank as a 455 percent loan on an annual basis.

The National Consumer Law Center has proposed capping annual rates for short term loans to 35 percent. However, Brad Beal, president of the Nevada Credit Union said rates that low — the equivalent of a $10 fee for a $700 loan — would not cover costs for the credit union.

Lois Kitsch of the National Credit Union Foundation said there are a huge number of loans available at credit unions that don’t resemble payday loans.