StretchPay The Credit Union Salary Advance Loan Alternative Presented By: Doug Fecher, President/CEO Wright-Patt CU

StretchPay What is it? A special line-of-credit loan designed to make it easy and less expensive for members to get short term credit.

How StretchPay Began Outgrowth of City of Dayton Public Meeting on Payday Lenders in Outgrowth of City of Dayton Public Meeting on Payday Lenders in Public Statement: “If you take away the payday lenders, we’ll have nowhere to go when we need cash.” Public Statement: “If you take away the payday lenders, we’ll have nowhere to go when we need cash.” Public Statement: “We can’t go to our credit union … they’ll turn us down just like the banks.” Public Statement: “We can’t go to our credit union … they’ll turn us down just like the banks.”

The Public Was Right! Credit Unions don’t make short term, low dollar loans to the credit-impaired.

StretchPay Initial Principles Make it as much like a payday loan as possible. This means: Limited credit check. Limited credit check. No payroll deduction requirement. No payroll deduction requirement. Fast and easy to make advances. Fast and easy to make advances. But: Make it more affordable for members, with better repayment terms, and breakeven for the Credit Union.

StretchPay Initial Principles A line-of-credit (to reduce the costs of making advances) with one distinguishing feature: Advances must be repaid in full before a new advance can be taken. A line-of-credit (to reduce the costs of making advances) with one distinguishing feature: Advances must be repaid in full before a new advance can be taken. Interest rate of 18% ($3/month). Interest rate of 18% ($3/month). Maximum draw amount of $250. Maximum draw amount of $250. Must be repaid in full in 30-days. Must be repaid in full in 30-days.

StretchPay Evolution Tested a no fee model, a $25 annual fee model, and settled on $35 annual fee… Tested a no fee model, a $25 annual fee model, and settled on $35 annual fee… Developed pilot program with 11 southwestern Ohio CUs to test risk- sharing concept and compete with Payday Lending footprint… Developed pilot program with 11 southwestern Ohio CUs to test risk- sharing concept and compete with Payday Lending footprint… “Fund” grew to over $50,000 “Fund” grew to over $50,000

StretchPay Today Borrowers pay a $35 annual fee for a $250 line-of-credit, and a $70 fee for a $500 line-of- credit…and 18% interest on their advances.

One Important Difference from Traditional Payday Loans … A borrower must repay their entire outstanding balance (plus interest) before any more advances are permitted.

A traditional payday lender might charge $15/$100 borrowed for as little as a two week term.

In other words... A StretchPay borrower who takes 12 advances on a $250 line-of-credit will pay approximately $77 in fees.

While a traditional payday borrower may pay $975 for the same amount of credit ($37.50 in interest x 26 payments).

StretchPay Evolution Successful program that is being expanded nationwide… Successful program that is being expanded nationwide… Supported by Filene REAL Solutions and Ohio Credit Union League… Supported by Filene REAL Solutions and Ohio Credit Union League… Formed a CUSO to facilitate the risk- sharing and nationwide implementation… Formed a CUSO to facilitate the risk- sharing and nationwide implementation…

The CUSO C redit unions offer StretchPay lines-of-credit in association with a non-profit CUSO called Credit Union Outreach Solutions, Inc. (CUOSI).

The CUSO Each time you collect an annual fee from a StretchPay borrower, you forward the fee to the CUSO, which will, in turn, help your CU offset any credit losses sustained under the program.

Reimbursement for Charged-Off Loans The CUSO will reimburse the credit union for 90% of the credit union’s losses. The CUSO will reimburse the credit union for 90% of the credit union’s losses. 10% coverage by the CU creates risk-sharing and encourages CUs to make reasonable efforts to collect on their losses. 10% coverage by the CU creates risk-sharing and encourages CUs to make reasonable efforts to collect on their losses.

In other words … You can offer members an alternative to payday lenders without incurring the credit risk associated with small dollar, minimally underwritten loans.

Minimal Underwriting Criteria An applicant must … Be a CU Member for at least 60 days and not be delinquent on existing loans or negative in any share account. Be a CU Member for at least 60 days and not be delinquent on existing loans or negative in any share account.

Minimal Underwriting Criteria An applicant must … Be at least 18 years old. Be at least 18 years old.

Minimal Underwriting Criteria An applicant must … Have verified income, not be in the process of filing for bankruptcy and not caused any participating CU a loss. Have verified income, not be in the process of filing for bankruptcy and not caused any participating CU a loss.

Specifics on StretchPay Loans Credit limits/minimum advances -$250 ($35 annual fee) Credit limits/minimum advances -$250 ($35 annual fee) -$500 ($70 annual fee) 30-Day Repayment Term 30-Day Repayment Term

Specifics on StretchPay Loans Advances must be paid in full prior to new/additional advances. Advances must be paid in full prior to new/additional advances. 18% Interest Rate (or the maximum permitted by applicable law, whichever is lower). 18% Interest Rate (or the maximum permitted by applicable law, whichever is lower). Payroll deduction is encouraged, but not required. Payroll deduction is encouraged, but not required.

Results to Date 16 Ohio credit unions (and the Ohio League) belong to the StretchPay CUSO. 16 Ohio credit unions (and the Ohio League) belong to the StretchPay CUSO. Over 35 credit unions (from across the nation) and seven additional Leagues are considering participation. Over 35 credit unions (from across the nation) and seven additional Leagues are considering participation.

Results to Date $93,000 in Membership Fees $93,000 in Membership Fees $40,000 left in fund from Pilot $40,000 left in fund from Pilot $51,000 fees collected YTD $51,000 fees collected YTD 14,000 Losses YTD 14,000 Losses YTD $171,000 in Fund Balance $171,000 in Fund Balance

To Join the Program Step One … Obtain Approval from your Board of Directors.

To Join the Program Step Two … Join the CUOSI by signing the membership agreements and paying a membership fee. Join the CUOSI by signing the membership agreements and paying a membership fee.

The Membership Fee CU pays a fee of $25 per $1 million in assets, with a maximum fee of $15,000. CU pays a fee of $25 per $1 million in assets, with a maximum fee of $15,000. The fee is not an investment in the CUSO, and should be expensed on the CU’s books. The fee is not an investment in the CUSO, and should be expensed on the CU’s books.

To Join the Program Step Three … Adopt a StretchPay Loan Policy and Procedure (a model P&P will be provided for adoption by your credit union). Adopt a StretchPay Loan Policy and Procedure (a model P&P will be provided for adoption by your credit union).

To Join the Program Step Four … Set StretchPay up on your Data Processing System. Set StretchPay up on your Data Processing System.

To Join the Program Step Five … Set up StretchPay Documents (line-of-credit app, note, agreement, T-I-L disclosure, closing letter and monthly remittance form). Set up StretchPay Documents (line-of-credit app, note, agreement, T-I-L disclosure, closing letter and monthly remittance form).

To Join the Program Step Six … Train employees on the StretchPay Program. Train employees on the StretchPay Program.

To Join the Program Step Seven … Set up the Monthly Accounting System for fees and loss recovery. Set up the Monthly Accounting System for fees and loss recovery.

To Join the Program Step Eight … Set up a Collection Effort Program. Set up a Collection Effort Program.

To Join the Program Step Nine … Market the Program.

To Join the Program Step Ten … Offer the StretchPay Program to your Members. Offer the StretchPay Program to your Members.

Frequently Asked Questions “Is a CU required to offer both a $250 and $500 line of credit?” No. A CU may offer the $250 credit line, the $500 credit line, or both. No. A CU may offer the $250 credit line, the $500 credit line, or both.

Frequently Asked Questions “Is there a minimum income requirement for a member to open a StretchPay line-of- credit?” Not at this time. Not at this time.

Frequently Asked Questions “Is a checking account required to open a StretchPay line-of- credit?” Not system-wide, but each CU has the option of having such a requirement. Not system-wide, but each CU has the option of having such a requirement.

Frequently Asked Questions “How are comments regarding the operation of the CUSO, or the StretchPay product, made to the CUSO?” An Advisory Council (made up of all StretchPay CUs and some League Reps) will meet regularly by conference call to discuss these issues. An Advisory Council (made up of all StretchPay CUs and some League Reps) will meet regularly by conference call to discuss these issues.

Frequently Asked Questions “Would I receive help in marketing the program to my membership?” Marketing materials have already been developed and will be made available for participating credit unions --- CU would only pay printing costs and for customization. Marketing materials have already been developed and will be made available for participating credit unions --- CU would only pay printing costs and for customization.

If you are interested... Contact John Florian at to receive sample operating and product agreements, as well as an implementation guide that includes a program overview.

Contact Information for Doug Fecher... Doug Fecher, President/CEO Wright-Patt Credit Union