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LEARN MORE ABOUT ARK (THE ASSET RECOVERY KIT)

ARK (The Asset Recovery Kit) combines low cost, short term loans with required participation in an approved consumer credit counseling program to help individuals and families repair their financial lives and fight the negative effects of repeated payday loan use. Pentagon Federal Credit Union has authorized a loan fund of $500,000 to be used for ARK. The Foundation will raise grant funds to create a loan loss reserve due to the high risk associated with short-term unsecured loans.

This will allow emergency loans to be made for a flat fee of $6.00 or 31.6% APR compared with payday lenders whose "fees" are the equivalent of 300% to 1,000% APR.

Pentagon Federal Credit Union and The Pentagon Federal Credit Union Foundation established a pilot initiative designed to help curb abuses associated with military payday lending.

Loans are used as hooks to provide financial counseling focusing on money and debt management. It is important to note that this program emphasizes self-help and strategies for fiscal responsibility – not charity. The “can do” attitude /spirit of the lower enlisted grades comes from training, teaching regimented practice and leadership. Success in the military is predicated on repetition and hard work. The same is true for responsible fiscal management.

How can ARK make a difference?

Consider the economics of a “normal” payday loan. An E-4 in Texas needs a $500.00 bridge loan until she gets paid (two weeks). She takes her military pay stub, photo ID and personal check post-dated for $590 to a very accessible and accommodating payday lender. The $90 is the percentage charge/processing fee for making the loan ($18 per $100 loaned). At the end of two weeks, the payday lender cashes the check. If the E-4 has continued financial difficulty, the payday lender will gladly “refinance” or “rollover” the $500 loan for another $90. It is not uncommon for payday loans to be rolled over 13 times. In this example, the E-4 would pay $1,170 in fees ($90 X 13) on a $500 loan.

Now, consider the economics of an ARK loan. The same E-4 in Texas needs a $500 bridge loan until she gets paid (two weeks). She obtains a copy of her most recent pay stub and takes it to a PFCU branch where she either has direct deposit or authorizes direct deposit of her military pay. A short loan application is completed; approved by the branch manager and a $500 loan is given to the E-4 for a $6.00 processing fee. She commits to a schedule of budgeting/debt counseling/money management courses. If after two weeks, she requires an extension, she will be given one for a flat fee of $6.00. Extensions are limited to four times. The key to ARK’s effectiveness is that it reduces borrowing costs and eliminates the need for repeated rollovers through quality counseling which in all likelihood will include debt restructuring. In this example, the borrowing cost will max out a $30 (assuming 4 renewals), thereby saving the E-4 $1,140.

Help break the cycle of payday lending and give now