On Friday I wrote that I doubted that credit unions were going to be able to provide a painless substitute for payday loans. Felix Salmon has responded at length, making three core arguments:
1. Credit unions already pay their overhead with current operations, so adding on a payday lending service should give them a cost advantage over payday lenders
2. Credit unions have a very low cost of funds, particularly in today's environment, where savings accounts might as well be paying interest in sticks of chewing gum.
3. If customers want these loans, credit unions should offer them.
As I said in the post, I don't think arguments from the fact that almost no one seems to be doing this should be definitive--all innovations consist of something that no one was doing before. But I will suggest some additional reasons for skepticism.