Pioneer Services responds to FDIC appeal to assist underserved military
Military Division of MidCountry Bank takes lead with ‘NewPath Loan’
September 18, 2007
KANSAS CITY, Mo.
In an effort to provide a responsible, affordable loan to service members, and in response to an appeal by the Federal Deposit Insurance Corporation (FDIC) for banking institutions to offer reasonably-priced small-dollar loan products to underserved customers, Pioneer Services, the military banking division of MidCountry Bank, recently announced it will begin offering a "NewPath Loan" in military markets.
"This initiative is being rolled out to military markets first due to recent legislative and regulatory efforts to protect service members from predatory lenders," said Tom Holcom, president of Pioneer Services. The Department of Defense specifically referenced the FDIC program in new lending guidelines for military personnel. "Pioneer Services has exclusively served the military market for more than 20 years and, therefore, we jumped at the opportunity to create something consistent with the FDIC's affordable small-dollar loan guidelines for the military community, especially in light of recent Department of Defense support for this effort."
The NewPath Loan initiative includes three different components: an affordable loan, a savings account, and free financial education. These are similar to criteria set forth in the FDIC's guidance to reduce the underserved market's reliance on high-cost payday and car title lenders that often have Annual Percentage Rates (APR) as high as 390 percent, and to develop new customers for mainstream banking services.
Holcom said the NewPath Loan "is designed to be fast, convenient, and accessible." It provides a one-time loan of $1,000, with nine manageable monthly installments of $123.92, with 30 days before the first payment. This adds up to an interest rate of 18 percent and an APR of 26.87 percent (based on a $35 origination fee), a rate consistent with the FDIC's guidelines. Service members can apply for the new loan at any of the Pioneer Services locations nationwide.
"The NewPath Loan offers military families immediate help to pay off urgent needs or high-cost unsustainable debt," said Holcom.
The second component involves a $50 "NewPath Savings Account" (NPSA) for any service member who pays off their NewPath Loan on time. Unlike other programs that offer savings accounts in combination with loans, the $50 will come from Pioneer Services, not out of loan proceeds. "The accounts are intended to encourage responsible payment behavior and good savings habits, thus allowing service members to borrow from themselves the next time there is an emergency," added Holcom.
The final component is free "Break the Debt Cycle" training, a one-on-one financial tutorial and exam that teaches military families how to gain control over their debt and start down the road toward financial independence.
"Pioneer Services and MidCountry Bank are pleased to help lead this effort by offering this unique combination of a loan product, a savings account and financial education to service members who need special assistance," said Holcom. "It's not just good business—it's the right thing to do for those who serve our country."