Why is the Professional Fire Fighters of Arizona (PFFA) working with Paycheck Direct?

Several days ago I received another catalog from Paycheck Direct.  This is a company that has recently entered into a relationship with the Professional Fire Fighters of Arizona (PFFA), the state organization representing Arizona's unionized firefighters.  Paycheck Direct is a catalog retailer that offers brand-name items with the option to pay, interest-free, via payroll deduction over a one-year period.  While the welcome letter by PFFA President Tim Hill included in the catalog states, "These great products are intended as a service to you," the true purpose of this partnership is to generate revenue for PFFA, which is paid a commission for any purchases made by PFFA members.

This sounds like a mutually beneficial relationship.  A company gets catalog business while the union gets additional revenue to fund its cause.  I think it is wrong for PFFA to give away personal information to a third party without prior permission, but they have apparently given Paycheck Direct access to members' addresses.  Hopefully, this is all they gave them.  That said, I think it is important to look closer at the cost of using a service like Paycheck Direct.

Here is a sample comparison of some of Paycheck Direct's prices versus Amazon's for the same items:

                                                       Paycheck                               Price           
 Product                                          Direct          Amazon          Difference     Premium

KitchenAid 5-Qt Mixer                  $358.99        $342.02            $16.97           4.96%
Calphalon 10-pc Cookware Set     $218.99        $165.57            $53.42           32.26%
Maytag 24.8 cu ft Refrigerator      $1,799.99    $1,699.50         $100.50         5.91%
Dyson DC40 Vacuum                     $548.99       $390.99            $158.00         40.41%
DeWalt 18v Tool Combo Kit          $548.99       $282.99            $266.00         93.99%
Poulan Pro 20" Chainsaw               $318.99       $188.24           $130.75         69.45%
Char-Broil 42K BTU BBQ              $829.99       $549.00           $280.99         51.18%
Klaussner Queen Bed                     $1,174.99    $1,128.79         $46.20           4.09%
Sleep Number p5 Queen Set          $2,449.99     $1,879.97        $570.02         30.32%
Aspen 3-pc Entertainment Center  $1,424.99     $1,133.57        $291.42        25.70%
Citizen Men's Eco-Drive Watch      $324.00        $285.00            $39.00          13.68%
Toshiba 58" LED TV                        $1,574.99     $1,097.99        $477.00        43.44%
Apple iMac Desktop Computer      $1,518.99     $1,199.98        $319.01        26.58%
Nintendo DS Cosmo Black              $218.99       $178.65            $40.34           22.58%
 
The prices include shipping.  Many of Amazon's products include free shipping, but with the exception of appliances, Paycheck Direct charges a minimum shipping charge of $19.00.  I did not include sales tax, which would further increase Paycheck Direct's prices as the tax would be applied to a higher initial price in each case.  The premium is the percentage one would pay over Amazon's price.  For the sample of items the premium ranges from 4.09% to 93.99%.

Here is where we have to start thinking financially about Paycheck Direct.  While Paycheck Direct does not charge interest on purchases, the premiums over Amazon's prices are the equivalent of an annual interest rate one would pay to use Paycheck Direct rather than paying cash at Amazon.  These premiums (interest rates) range from low (4.09%) to offensively high (93.99%).  The highest annual percentage rate (APR) on an Amazon Visa rewards card is 22.24%  Of the 14 items sampled, the premium on only three items is below 22.24%.  This means that the final cost of most items, including purchase price, shipping and interest, would be less if bought with an Amazon Visa credit card and paid off in one year than if purchased through Paycheck Direct.  22.24% is a rather high interest rate, so it would be cheaper still with a lower interest rate credit card.

Readers can judge for themselves if Paycheck Direct is a service of value to them. There may very well be some individuals who find that it meets their particular needs.  In the end, it is a business that must make money from the service it provides, though it could be argued that the only real service Paycheck Direct provides, payroll deduction, is more a service to them than it is to the purchaser. 

The real issue here is whether PFFA, which is supposed to look out for its members' financial well-being, should promote a service of dubious value to its members.  According to the PFFA's IRS Form 990 for the fiscal year ending June 30, 2012, they had total assets of $2,384,940 and total revenue of $762,455, of which $562,601 was member dues.  This hardly seems to be an organization short of funds, so why would it encourage members to shop through Paycheck Direct?  Is the kickback that PFFA gets in the way of commission worth having its members pay as much as 90% more for products?

I certainly can not answer for those that signed PFFA up for this program, but I do know that the union is supposed to work for the members, not the other way around.