Becoming an ARK Credit Union Partner- Frequently Asked Questions

Q: What is a payday loan and why should we be concerned about it?

A payday loan is a way for a consumer to receive a small amount of cash, for a high fee, on a short-term basis against his or her next paycheck. It's a quick and easy process in which no one is turned down due to bad credit. Payday lenders do not ask for a credit report, just a current pay stub, a form of ID and a signature.

Payday fees range from $10 to $35 per $100 borrowed, the equivalent of 182% - 910% APR. People go to payday lenders because they cannot cover their bills. They fall further behind each time they roll over the loan. They have to go back again and again and the debt piles up. A recent study estimated that the average payday loan borrower eventually repays $793 for an initial $325 advance.

Payday lenders target the military not only because the upheavals of military life create financial stresses, but also because the stability of a government check means the lenders will get their money back. Ultimately, problems with debt affects readiness; 60% of security clearances are denied due to financial problems.

Q: What is the Asset Recovery Kit (ARK)?

ARK is a branch-based, low-cost alternative to payday lending. It offers interest-free, short-term advances and personal money-management training to those with emergency cash needs. To attract those who would otherwise use a payday lender, ARK is designed for ease of application: no credit report is pulled and no loan application is filled out - just an easy-to-complete sheet requesting contact and pay information. To help the ARK user learn new financial behaviors, he/she is required to attend a financial counseling session before each subsequent cash advance.

Q: How Does ARK work for members?

Your member fills out the ARK Application at your branch. No credit report is pulled. Up to $500 can be borrowed each time. The member pays a flat fee of $6 for the advance (for the second through fifth advance, the fee can be rolled into the cash advance.) The member sets up a direct deposit to allow payment of the advance on the due date; the member also authorizes uncollected funds to be drawn on an external account. Five advances can be given in a one-year period; however, each advance after the first one requires that the member show proof of a financial counseling session at a Consumer Credit Counseling Office.

Q: Why would we offer ARK to our members?

We believe that it is unfair to prey upon the brave men and women, and their families who sacrifice so much to defend our country. In addition, everyone in this country deserves a chance to reach the American Dream of financial security.

ARK is a no-hassle, no-risk program for your credit union.

• The Pentagon Federal Credit Union guarantees you against any losses from ARK; you can help solve the problem of predatory lending while remaining safe and sound.
• You don't have to re-invent the wheel. ARK is a proven program. The Foundation shares the procedures and forms for ARK, trains your branch, loan and collection staff and pays for marketing materials and ad placements branded with your name and logo.
• ARK is a break-even program. The $6 fee will cover your overhead costs so you don't have to stretch your budget to offer a solution to underserved communities.
• You won't suffer a public relations hit by offering high-rate loans to people who can least afford them, even if you are just trying to cover your losses. With ARK you have no losses!

Q: Why is The Pentagon Federal Credit Union Foundation involved?

Many see the need to offer a consumer-friendly alternative to predatory lending and have donated to The Foundation to support the ARK solution. The Foundation is using these funds to create a loss reserve fund those who offer ARK and to help spread the word to consumers who would benefit from the program.

Q: How do I know that ARK will work for my credit union?

ARK is a proven program. In the first two-and-one-half years of the ARK program, $462,000 in advances have been given to 826 individuals and families. Losses have stayed in the 9% range, all guaranteed and repaid to the participating credit unions by The Foundation.

Q: What does the Foundation provide with the ARK Partnership?

• Details of the set-up of the program with your loan, branch operations, database and collections divisions.
• Introduction to local Consumer Credit Counseling Services (CCCS) director.
• Training for staff involved in the ARK program.
• Templates for forms used in ARK delivery.
• Branded marketing flyers and tabletops, and paid ad placements in newspapers of your choice.
• Collection consultation.
• Guaranteed payment for any losses on ARK advances.

Q: What does my credit union have to do?

• Contact the Foundation to express your interest.
• Gain Management and Board approval to offer ARK.
• Make management and affected staff available for training-call sessions.
• Incorporate forms into your operational system.
• Change necessary codes in your loan system to allow disbursal of ARK.
• Report monthly to Foundation on ARK advances and any delinquencies.

Q: Who do we contact if we want to explore the ARK Partnership?

Roderick (Rocky) Mitchell, President
The Pentagon Federal Credit Union Foundation
703-838-1020
roderick.mitchell@pentagonfoundation.org