The Truth about Pay Day Lending

Authored By: Kristen Williamson on 2/26/2021


What is a Pay Day Lender?

We have all seen them. Whether they have a store front in the local strip mall that you frequent or they are next door to your favorite coffee shop, it seems like they are everywhere.

According to the Oxford Dictionary, a pay day lender is “a company that lends customers small amounts of money at high interest rates, on the agreement that the loan will be repaid when the borrower receives their next paycheck”.

But what happens when a pay day lender charges such a high interest rate that the payments make it impossible for a person to pay back the loan? This sort of predatory lending is, unfortunately, both common and very dangerous to the long-term financial wellbeing of our communities. However, there is a light at the end of the tunnel: credit unions. Credit unions are well equipped to offer alternatives to pay day loans.

Helping is in Our Roots

The concept of a credit union came about in the mid 1800’s in Europe, when the movement for cooperatively-run industries began to emerge. It was the Rochdale Society of Equitable Pioneers who first borrowed a small amount of money from each member to open a cooperative store that sold baking essentials.

A few years later, poor, urban workers in Germany used this concept to pool their money together to take out loans together, in order to avoid going to loan sharks for help. This process in 1849 is considered to be the very first credit union in the world.

Today, credit unions still operate on the mission of “people helping people”. We exist in order to serve our communities, especially when times are tough.


“As not-for-profit financial institutions, credit unions are able to invest back into their communities and offer lower rates and fees. Credit union banking is built for people, not profit, and the financial well-being of their membership is a bedrock to their mission.”
–Patty Corkery, EVP/COO and General Counsel Michigan Credit Union League & Affiliates


Credit unions came into existence to combat the endless cycle of unfair lending rates from loan sharks.

Yet still today, pay day lenders are prevalent. As a matter of fact, there are often bills proposed to our government that would expand the authority of pay day lenders, even here in Michigan.

But as a credit union, we want better for our members and our community. Loans with triple digit interest rates are far from a solution. While it may help someone make a single payment, long-term improbability of paying of the loan is much too common.

Credit unions are already committed to serving in a safe and fair way. At Members First, we offer debt consolidation options, a personal “Life Happens” loan, as well as a special loan during the holiday season called the “Whatever Loan”. Our Whatever loan is often used to purchase Christmas presents, catch up on utility bills, make a rent payment, or even simply to improve a member’s credit for the next time they might need a loan.

At credit unions, you aren’t just a credit score. It’s in our nature to assist members that are struggling financially, and to help prevent them from entering a spiral of debt that can result from higher-priced products. So, the next time you might be tempted to stop into a pay day lending shop, call your local credit union instead!

« Return to "MFCU Blog"
No comments have been posted yet.
Post Comment

(Only last initial will display on comment)

(Not displayed on Comment)

Security Code:
What's this?
Go to main navigation