Unlike payday loans, which impose staggering costs on unsuspecting borrowers, Better Choice loans have low fees and safeguards to prevent borrowers from getting caught in vicious debt traps. Payday lenders typically target those who can least afford to pay the high fees associated with their revolving short-term loans, such as working mothers, military families, and people living paycheck to paycheck.
"Payday lenders prey on desperate families and cost those who are already struggling to make ends meet billions of dollars per year in fees," Pennsylvania's Treasurer Casey Casey said. "Our Better Choice program gives working people a real alternative to borrowing against their next paycheck. With lower costs, extended installment payments, financial counseling, and a savings boost, Better Choice helps families make ends meet without devastating their budgets."
Better Choice loans differ from predatory payday loans in a number of important ways:

* A Better Choice loan must be paid in full before a borrower can take out another loan. This prevents a borrower from getting caught in a never-ending cycle of rolling over a loan on its due date and paying exorbitant fees for the privilege.

* Better Choice customers will be loaned an additional 10 percent that will be deposited in an interest-bearing savings account in the borrower's name.

* Credit unions will offer financial counseling to Better Choice customers to improve their fiscal literacy and help them make smart long-term financial decisions.

* The Better Choice loan application fee will not exceed $25, regardless of loan size. Payday lenders commonly charge as much as $25 per $100 borrowed.

* The interest rate charged on Better Choice loans will not exceed 18 percent. Payday lending debt traps can lead to effective interest rates in excess of 500 percent.

* No credit check is required for a Better Choice loan.

* No collateral is required. A Better Choice borrower does not have to provide a post-dated check as security for the loan's eventual repayment.

* The 90-day loan repayment term is considerably longer than most payday loans, which require payment in full by the next paycheck.

* Loan payments can be made in weekly, bi-weekly, or monthly installments.

Casey's staff and PCUA officials spent the past year developing the key elements of the Better Choice program.