Frequently Asked Questions
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What is a Predatory Relief and Intervention Deposit (PRIDE)?
A Predatory Relief and Intervention Deposit is a deposit made by the Federation in a credit union that is used to collateralize a portion of the loans made by that credit union to fight predatory or abusive lending. The Federation shares the risk on these loans by assuming the risk on 25% to 40% of the loan principal. As the credit union books loans to members that are victims, or about to become victims, of predatory lenders, funds from the deposit are transferred to accounts pledged to the credit union to support these loans. Any losses are to be shared pro-rata between the credit union and the Federation. When the PRIDE deposit matures, the credit union repays the Federation the original deposit amount minus the Federation’s share of losses realized on anti-predatory loans secured by the deposit
The collateralized portion of each loan is the share of the loss the Federation is willing to take. Eligible anti-predatory lending activity can include:
- Assistive Technology
- Payday lending
- Automobile title lending
- Tax refund anticipation lending
- Home equity/residential mortgage lending
How does a Predatory Relief and Intervention Deposit work?
The following is an example that illustrates how a PRIDE works:
| 1. |
PRIDE deposit in credit union: |
$50,000 |
| 2. |
Credit Union makes anti-predatory loan of: |
$40,000 |
| |
Portion collateralized by funds from the Federation deposit: |
25% |
| |
Amount collateralized by funds from the Federation deposit: |
$10,000 |
| 3. |
If the loan were to go into default, |
|
| |
Amount collected after all collection efforts: |
$16,000 |
| |
Loss realized after all collection efforts: |
$24,000 |
| |
Amount of loss taken by credit union: |
$18,000 |
| |
Amount of loss taken by the Federation: |
$6,000 |
| 4. |
At maturity of the Federation deposit (assuming no other losses): |
|
| |
Amount repaid to the Federation by credit union: |
$44,000 |
Who is eligible for a PRIDE Deposit?
All credit unions that have established anti-predatory lending programs, or have a business plan to introduce a new program, and have been Federation policy members in good standing for at least six months are eligible for PRIDE Deposits. The recipient must have at least three years of lending experience.
What are the terms of a Predatory Relief and Intervention Deposit?
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1. For Assistive Technology loans: |
|
|
Maximum Amount |
$100,000 |
|
|
Rate |
4.75% |
|
|
Maturity |
up to 4 years |
|
2. For anti-predatory payday loans or tax refund anticipation loans: |
|
|
Maximum Amount |
$100,000 |
|
|
Rate |
3½ % |
|
|
Maturity |
up to 2 years |
|
3. For automobile title lending relief: |
|
|
|
|
Maximum Amount |
$100,000 |
|
|
Rate |
4 ¾ % |
|
|
Maturity |
up to 4 years |
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4. For home equity and residential mortgage relief: |
|
|
|
|
Maximum Amount |
$250,000 |
|
|
Rate |
5.0 % |
|
|
Maturity |
up to 9 years |
Are there any restrictions on the use of the funds?
Yes, the credit union must use the funds in its anti-predatory lending program for loans to members who are victims, or about to become victims, of predatory/abusive lenders.
If approved, what documentation does the Credit Union and the Federation sign?
Both parties must sign a Predatory Relief and Intervention Deposit Agreement. The terms and conditions are described in this agreement.
What is required in order to apply for a Predatory Relief and Intervention Deposit?
Complete and send in an application form, and:
- Description of credit union’s predatory relief lending program.
- A business plan
- Financial projections
- Lending policies
- Two most recent years audited statements
- Other documents as required in the application.
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