Under legislation on its way to Gov. Chet Culver, financial institutions in Iowa would be authorized to offer small loans to underserved populations as an alternative to high-interest payday or car-title loans or costly wire transfer and check-cashing services.

Senate File 347, passed by the House of Representatives on April 18, would allow credit unions and other financial institutions to lend up to $3,000 for terms of up to 12 months. Fees for each loan may not exceed $30 and interest rate charges are capped at a 21 percent annual percentage rate. Culver is expected to sign the bill.

A borrower taking out a 90-day loan for $300 under the bill’s provisions would save an estimated $150 compared with the interest that would be owed on a typical car-title loan, according to an analysis prepared by the Iowa Credit Union League.

The legislation was the result of the efforts of a Payday Lending Task Force established by the league to review alternative programs being used by credit unions around the country.

The bill also would allow credit unions to offer check cashing and wire transfer services to anyone who is eligible for membership, as a way to serve low-income or immigrant populations that wire money internationally. The provision mirrors legislation that was recently approved by Congress for federal credit unions.