July 13, 2009

Governor Tim Kaine announced Monday the establishment of the Virginia State Employee Loan Program, a unique partnership to help meet the short term loan needs of state employees as they manage through the worst economic crisis in generations.

The pilot program, a partnership between the Commonwealth of Virginia Campaign (CVC) and Virginia Credit Union (VACU), will offer small loans—$100 to $500—to state employees facing financial difficulties.

As a requirement of the loan, borrowers will complete an on-line financial fitness course and exam to keep them on sound financial footing.

“This program will allow our state employees to receive small loans without having to go to predatory lenders,” Governor Kaine said. “If the Commonwealth can offer this kind of program, other large employers may consider similar initiatives of their own.”

Participants in the State Employee Loan Program must be a non-probationary state employee and a member in good standing with the VACU. Participants must be a member of the VACU, maintaining at least $5 in a savings or checking account.

To qualify for a loan, participants must successfully complete an online financial fitness course followed by a 10-question financial literacy exam.

The loans will carry an APR of 24.99 percent and will be payable over six months with no prepayment penalty. Loans will be repaid through direct debit from employee’s VACU checking or savings accounts, in up to 12 semi-monthly payments.

Employees can have only one loan at a time and may apply for a maximum of two loans annually. There will be no credit check for loans and the loans will not be reported to credit agencies.

A $100 loan will be repaid in semi-monthly payments, with a total repayment cost of about $108. A $500 loan will be repaid in semi-monthly payments, with a total repayment cost of about $540.

“We are proud to collaborate with the Commonwealth of Virginia Campaign and help administer this program to benefit state employees,” said Jane Watkins, President/CEO of Virginia Credit Union. “Financial education is a major focus of Virginia Credit Union and we are pleased to see an educational component as part of the program.”

Loans will be backed by the Virginia State Employee Assistance Fund (VSEAF). Both CVC and VSEAF programs are run by state employees for state employees, and are funded solely from employee contributions, with no state tax dollars involved.