Programs appear to help people exit payday loans
KANSAS CITY, Missouri – Rebecca Devereux-Wells has had many highlights in her life.
“I was a nurse, at the top of my field, nothing less. I was pretty proud of myself for 25 years,” she said.
But with that came the lows.
“[I] was injured in a car accident, then another at work, ”she said. “I had to go on disability. You spend two thousand dollars every two weeks on disability payouts, that’s not much. “
It was a hollow that almost pushed her past her breaking point.
“I took the loan, the title loan and I got trapped,” said Devereux-Wells.
It was a blur to sign the securities lending firm’s papers, she said, leveraging her car for $ 1,200 to get by.
She paid $ 230 a month, but it got so out of hand that she barely covered the interest.
“You are getting discouraged,” Devereux-Wells said. “You get off. And you start to understand that there’s really no way out of this. You’re just going to pay forever until they get your car.”
She kept her car, but the burden was getting too heavy.
The debt trap
Thousands of people have been drawn into what is called the “debt trap” by paying exorbitant interest rates on payday loans or securities.
Hundreds of payday loan companies dot the metro, many of which make their way to the city’s low-income neighborhoods.
Neither Missouri nor Kansas has a cap on interest rates. As interest goes up, often to 500% or more, people lose their cars, ruin their credit and file for bankruptcy.
Currently, at least 16 states limit interest rates to 36% or less. But those in Texas could pay an interest rate as high as 660 percent.
According to the Consumer Financial Protection Bureau, more than 80% of payday loans are “rolled over” or renewed. As a result, borrowers pay more in fees than they initially borrowed.
People can also receive payday loans online, but reviewers have noticed that they do not have the same standards as physical storefronts. An overseas-based online loan company had an interest rate of 1,000%.
Help is there
For those who have taken out a payday loan, the help is there.
“I’ve never heard anyone say, ‘Oh, this is the best thing that has ever happened to me,’ said Garland Land, a key figure in the community working to end predatory lending. “They always say, ‘It was the worst decision I’ve ever made in my life.
The earth works with Caisse populaire du Saint-Rosaire and the Community Service League in Independence on a special program.
“Over the past four or five years, we’ve provided over $ 900,000 in loans to low-income families who were previously in the debt trap,” Land said.
Devereux-Wells is one of the 400 people they have helped.
“I would recommend it to anyone,” she said.
Holy Rosary Credit Union pays off the payday loan and then gives the person a new loan with an interest rate of 14%.
“When I tell them about it, I just see the weight come off their shoulders,” Land said. “And a lot of times they just wanna hug me, and I wanna hug them.”
The program has a low default rate of 7 percent. Land said it was a success, given that most program participants have credit scores below 500.
Holy Rosary has sufficient funds to provide the loans, while donors and churches provide the additional dollars to cover defaults.
These types of services are on the increase in the metro.
Catholic Charities of Northeast Kansas launched its program, Kansas Loan Pool Project, Four years ago. They began to notice that when people approached them for emergency help, they were often in a bind because they had taken out a payday loan or a security.
Amelia Reyes, senior director of asset development for Catholic Charities of Northeast Kansas, said most family support centers have wait lists for their loan program.
“There is a pretty high demand,” Reyes said.
Catholic Charities does the same as Holy Rosary, but with an interest rate of 6.75%.
Catholic charities cannot fund anything over $ 1,500. A person must have traceable income and agree to meet with a case manager.
“They don’t have good credit, or some of them don’t have credit, so they couldn’t get approved for a traditional loan,” Reyes said. “So that’s one way the program helps them build credit as well.”
Catholic Charities works with a handful of banking organizations that are willing to take out a high risk loan.
Reyes said the loan cycle lasts a year, on average, depending on a person’s financial situation. Catholic Charities offers financial education and one-on-one coaching.
Over the past four years, they have noticed that 63 percent of people live below the poverty line, and about 100 of the 250 registered have social security or have a disability. A total of 112 people completed the program.
However, Catholic charities sometimes have to deny people the program because their budgets show that they would not be able to reimburse Catholic charities. They always offer financial advice in the hope that these people will one day qualify for the program.
“We also don’t want to cause people to fail where they’re going to default on the loan,” Reyes said.
Programs like the ones that started in Kansas City are trying to prepare people for success when they say payday lenders fail.
Land runs a class every Wednesday at the Community Services League that teaches people how to live on a small income. Time and time again, at least one person in the class says they have taken out a payday loan.
“What we’ve realized is that the only way to fight this industry is to do it locally,” Land said.
And they did.
Three years ago, Land and other activists worked with the Independence City Council to change the Predatory Lending Companies Ordinance.
It only authorizes one business for 15,000 inhabitants. There were 32 back then, and now that number is declining.
“Over time, we’ve limited them just by going out of business,” Land said, “and they can’t go back to business because by ordinance we can only have eight in town.”
Blue Springs and Liberty followed Independence’s lead and passed similar ordinances.
In November, Liberty voters decided to limit payday loan companies to one for every 15,000 people, or about two companies in total. Right now there are about seven.
Now payday loan companies will have to shell out $ 5,000 instead of $ 50 to renew their license each year.
“We looked at both Independence and St. Louis and took some of their language and incorporated the more stringent measures from the two initiatives into our own,” said Abby Zavos of the Northland Justice Coalition. “So this is one of the most restrictive measures in Missouri.”
Northland Justice Coalition, along with Second Baptist Church, took the initiative to lobby for the ballot ordinance. Second Baptist Church also runs a similar program that helps people repay their loans.
Residents of Blue Springs voted to change its ordinance to limit these businesses to one per 12,000 residents, whereas previously it was one per 4,500 residents. There are currently nine payday showcases.
“That’s all their MO is to prey on vulnerable people to mislead them,” Zavos said. “And then that money goes to the company. It is not reinvested in the community.”
The community that is committed to launching these programs is aimed at people like Devereux-Wells, who are now repaying their loan smoothly.
“My credit rating goes up because of them,” Devereux-Wells said. “Yes, that is just fantastic.”
She plans to pay off her loan by next winter and get on with her life.
“When you feel so oppressed, there is no way out,” she said. “It changes you as a person. You start to see the world in a different way and no one should have to live like that.”