“Getting stuck” with payday loans.
By JESSICA LOVE
Courtesy of the Indiana Capital Chronicle
Ever got stuck in the mud with your car or truck? and the more you try to get out, the deeper your tires sink? I have.
So I know from experience that if you don’t have the luxury of waiting for things to dry, you need help – a push or a tug – to break free.
And you’ll probably feel a little embarrassed. I mean, technically, while you had no intention of getting stuck, no one else was behind the wheel. Either you didn’t see the danger ahead, or you thought it wouldn’t be as bad to traverse as it was.
Even if you didn’t handle it well or calculated the risk and thought you could pull through, the fact remains that it happened and it was your “blame”. Thinking back, you wish you’d done something other than the solution you were looking for — the one that resulted in your tires “sinking deep into dirt and mud” (for dude Little blue truck fans).
Now imagine that the vehicle you have in mind represents your family’s financial health and the process of being “stuck” as a result of choosing to solve your short-term problem yourself – rather than asking for help, or not going to you Had to think of other options – a payday loan represents. The “solution” now becomes a bigger problem to solve than the original problem.
That’s where the analogy ends, as muddy spots don’t have business models designed to hold you down, and payday lenders do. The gains are really made by people getting stuck more where the interest rate in Indiana ends up being as high as 391%. And you really need to find a solution to your solution.
This is why I often refer to the payday industry as one of the most heavily subsidized markets out there – because government and nonprofit resources are so often needed to bail out people from the disasters that cause payday loans.
But what if it didn’t have to be like this?
One avenue to pursue is policy change. For now, most of the burden is on Congress, and your legislative efforts will help make the Veterans and Consumers Fair Credit Act – which limits all payday loans to 36% – a reality. You can also ask your state legislatures to set a state cap of 36%. But until and even when the legislation is passed, many Hoosiers will still need a more responsible way of borrowing.
So what if there was another route?
What if most of the 88% of Hoosier voters polled who indicated that Indiana would have a payday cap of 36% – who are able to offer a different route – a route to an alternative solution for their Employees would hit and colleagues?
The implications, to deepen my analogy, would be earth-shattering for Hoosier families who don’t have the resources to weather a financial shock.
A special “bypass” – previously only available in 23 counties – has recently become available nationwide. If you’re a business owner, a human resource representative, or just someone willing to talk to your boss about providing a financially sustainable option for your employees, the solution I’m bringing to you is the Community Loan Center -Program.
It is an affordable, employer-based microcredit program. So what’s the catch?
Well, as hard as it is to believe, there really isn’t one. For companies that have enrolled in the program, the CLC program is provided as an employee benefit at no cost to the employer. Literally, employers only have to: 1) confirm employment when applying for a loan, and 2) set up payroll deduction according to the employee’s repayment schedule. As a result, they immediately attract employees who are less stressed and more present for their job.
This affordable 12-month loan, made available by nonprofit organizations, is designed to get people out of debt, or keep them out of it, rather than lock them in it. (CLC loans can be used to pay off payday loans.) The reason is simple: the nonprofit providers that offer this program would rather direct their resources toward improving a family’s economic fortune than saving them from the quake, emanating from a payday loan.
Just think how you could bring this alternative to your workplace — and actually help solve a colleague’s short-term financial dip in a way that makes it manageable and gets people out of the dirt without getting stuck.
Jessica Love is executive director of Prosperity Indiana, a statewide membership organization for individuals and organizations that strengthen Hoosier communities.