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Thankfully the NDP government here in Alberta has announced new legislation on payday lending. The government is proposing the lowest payday lending rates in the county while simultaneously fostering better alternatives to help people get short-term credit.

Connect First Credit Union and Servus Credit Union are the two biggest credit unions in Alberta and they will offer short-term, payday-style loans at lower rates with longer payback periods. These two institutions are collectively 80 per cent of credit unions in the province and they are figuring out how to properly price these loans without gouging customers.

“I don’t see payday loans as high-risk loans,” said Shelley Vandenburg, president of First Calgary Financial, a division of Connect First Credit Union.

“We’re putting skin in the game. We believe in this social issue. We believe we can make a very positive impact, and help people get out of debt. I believe strongly you can balance purpose and profit.”

Connect First Credit Union (First Calgary Financial and Chinook Financial) partnered up with anti-poverty non-profit Momentum in Calgary and have been experimenting with what they’re calling a “cash-crunch loan” for more than a year. The pilot project offered a loan up $2,500 with an annual interest rate of 12 per cent. The typical annual interest rate on a payday loan is around 500 per cent.

Credit unions getting into the short-term credit game makes perfect sense. You can’t just regulate payday lenders out of business. They sprung up in the first place because compared to bank overdraft fees the rates you would get at payday lender were a bargain. It’s the smart play to simultaneously tighten regulations and ensure that a viable option is ready to go.