Springfield Church and Credit Union Create Payday Loan Alternatives for Area Poor

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Jennifer Trogdon is a mother of five children, four of them with special needs. Her husband works in a fast food restaurant and earns a little more than minimum wage. She is disabled.

The Springfield woman, 39, says her family is trapped, struggling to break free from payday loans and car titles.

“It started with a vehicle repair,” she said. “You don’t qualify for a loan from the bank, so you take out that payday loan. They explain it to you and you think it won’t cause a refund problem, but you really don’t fully understand it. And not have another option, what else are you supposed to do? “

The Trogdon dilemma is all too common in Springfield, according to members of the Impacting Poverty Commission who have directly taken on what they call “predatory lending institutions”.

The commission issued a call to action for the financial and nonprofit sectors of the community: to work collaboratively to provide low-interest, alternative lending options.

So far, two Springfield-based organizations have committed to doing just that.

Members of the University Heights Baptist Church dug in their pockets to raise $ 6,000 for the University Hope account at the Educational Community Credit Union on East Grand Street. The goal is to raise an additional $ 14,000.

And the CU Community Credit Union announced on Tuesday that it would receive a grant of $ 1.9 million in early 2016 to create the “Fresh Start Loan Program”.

Both programs offer small, short-term loans with reasonable interest rates and fees without a credit check. To be eligible for either program, the person must have some source of income.

“We talk to them about their finances and their ability to repay,” said Bob Perry of University Heights Baptist Church. “Typically, we look at the working poor or retirees. “

In addition to helping people break the payday loan cycle, the programs help rebuild bad credit, which is often the reason people turn to payday lending institutions in the first place.

Missouri has done little to cap the interest rates that payday and title loan institutions can charge. The average interest rate is 450% per annum, and many lenders do not allow borrowers to pay the principal of the loan: it is either to pay the interest and fees or to repay the entire loan. .

Lenders justify the high rates and strict rules because they offer small loans without a credit check, which most banks cannot afford.

University hope

A group of University Heights church members began studying the local poverty issue in April. To learn, the group attended a poverty simulation, took city buses, read books and watched videos on the issue.

“We decided to focus our efforts on the working poor and felt we could do something proactive about payday loans,” Perry said in an email. “We thought our church could do something to make a difference for at least a few people. We started with $ 1,000 from the Deacons Charitable Fund, then we had about 6 church members who donated 1,000. $ each to the cause. “

People can borrow small amounts and not worry about a credit check, as their loan from the Educational Community Credit Union is backed by money from the University Hope Fund.

The credit union makes a loan. The church’s University Hope fund provides a guarantee to support the loan.

When the fund hits the target amount of $ 20,000, Perry said he would be able to provide small “rescue loans” to about 40 people at a time.

In less than a month, the University Hope program has helped three families so far.

The Trogdon family is one of them. For the first time in a few years, Jennifer Trogdon has hopes of breaking the loan cycle.

Trogdon borrowed $ 573 from the University Hope fund. She used it to pay off one of her payday loans that she borrowed almost two years ago for $ 500. She thought she had spent a few thousand dollars trying to pay off that initial $ 500 loan.

With the loan from University Hope, her monthly payment was reduced to $ 18. Previously, Trogdon had said she would make an interest payment of $ 200 one month and then had to pay $ 679 the next month to repay the loan. Every two months, she would have to borrow again to pay off the $ 679, continuing the cycle.

“This is going to save me a lot. I am very grateful for the help,” Trogdon said. “For the month of December, I’m going to be in the positive once the bills and rent (are) paid. It’s a nice feeling.”

She and her husband plan to use the tax returns to pay off their remaining payday loans and car titles, and hopefully have some extra to put away for emergencies.

“If you don’t have that emergency fund, you can’t get out of the trap (of borrowing),” she said. “You go there day after day hoping nothing goes wrong.”

CU Community Credit Union’s “New Beginning”

The US Treasury will provide the CU Community Credit Union grant of $ 1,988,750 to launch the Fresh Start loan program in early 2016. The program will provide small, short-term loans with reasonable rates and fees.

Judy Hadsall, president and CEO of the CU Community Credit Union, said she hopes the program “will create a lasting impact on people’s financial well-being.” It will be available to residents of Greene and Christian counties.

At a press conference on Tuesday, Hadsall explained that the program will also give people the ability to build and repair credit, break the loan cycle, and consolidate their existing payday loans or other short-lived loans. term at high interest rates.

CU Community Credit Union will provide access to traditional banking services such as checking accounts with debit cards, online and mobile banking, and a network of nearly 30,000 free ATMs across the country.

City Manager and Impacting Poverty Commission Co-Chair Greg Burris told the press conference that the Fresh Start program will bring hope to many people and families in this community.

“Twenty-six percent of Springfield lives below the federal poverty line,” Burris said. “A lot of these people have two or three jobs at a time.

“And in many cases, they are trapped in debt,” he continued. “The truth is that a lot of these families are suffering and struggling with this problem and they are drowning in debt.”

State Representative Kevin Austin also spoke at the press conference. He said when bills to curb predatory lending practices were introduced and debated, supporters argue that there are no other lending options – other than payday loans and loans. on title – for the 26% mentioned by Burris.

“Well, now there’s a place to go. They can come here at the CU (Community) Credit Union. It takes that argument out,” Austin said. “This program doesn’t eliminate debt. It doesn’t pay it down and bail them out. Instead, it gives them a reasonable loan that they can repay.”

The CU Community Credit Union is located at 818 N. Benton Ave. More information is available at mycucommunity.com.

What the Commission said about the impact on poverty

In its report published in October, the Impacting Poverty Commission called payday lenders and securities companies “predatory lending institutions” that are a barrier to economic mobility in the city.

The report states that “Predatory lenders (payday lenders and securities companies) generally serve as a ‘lender of last resort’ for poor individuals and families. When people or families living in poverty need cash, predatory lenders may be their only choice. For the “working poor”, using a predatory lender can be the “slippery slope” that leads them into a cycle of poverty from which they cannot escape. The growth of the predatory lending industry in Springfield is another indication of the rising level of poverty According to the recent General Assembly of Payday Lenders report, predatory lending institutions in Missouri charge on average more than 400% of annual interest on loans. “

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