Last week, Vancity (one of the top credit unions in BC) introduced a new product called the Vancity Fair and Fast Loan.

Here’s the good news: it’s a lot cheaper than payday loans. As reported by Kevin Griffin in the Vancouver Sun, “If a credit union member borrows $300 for minimum term of two months and pays it off in two weeks, it would cost $2.20, a 19 per cent annual percentage rate.” Whereas a payday loan from the Cash Store for $300 (with a 14 day term) would cost $69, which is 23% interest on the principal and equates to an annual interest rate of 599.64%.

And here’s the bad news:

It’s much less accessible.

One commenter muses “Van city will probably have membership requirements, credit requirements, maybe a direct deposit requirement. They will have stronger recourse to get their money back, less risk for them therefore a lower interest rate.”

And he is not too far off. Vancity offers their version of a payday loan to Vancouver City Savings Credit Union members only, and approves them only when the applicant can meet certain income and credit history requirements.

To become a Vancity member, you must be a resident of British Columbia and you need to keep a balance of $5 in your Membership Shares account (for buying and holding your 5 shares in the Credit Union).

To apply for the Fair & Fast loan, a member must provide proof of income with a recent pay stub or letter of employment, as well as show a good credit history on their bureau, or bring their 3 most recent consecutive bill payment records for two different companies.

How many payday loan borrowers have a good credit history? Many borrowers are already getting behind on debt and bill payments, and use credit to supplement a lack of savings in emergency or income loss situations.

Our takeaway is that Vancity’s version of payday loans are a good thing for some of its members, and a step in the right direction for the payday loan industry, however they are too exclusive to be helpful to the vast majority of payday loan borrowers.

If all the Credit Unions and banks started offering short-term loans with lower borrowing costs, these would be more accessible to payday loan borrowers and potentially improve the current pit of debt created by the payday loan industry.