So a banker, a Lutheran, and a petition circulator walk into a bar….
Apologists for payday lenders tell us that Chuck Brennan, Rod Aycox, and other loan sharks provide a vital service at a fair price (namely, triple-digit annual interest). But well-read reader Deb Geelsdottir sends this article that shows that honest bankers of good conscience can offer a comparable emergency financial product that does not take advantage of low-income people:
Sunrise Banks of St. Paul, which has developed a small-dollar loan program that already covers 10,000 employees through participating employers, last month won a $2.2 million Next Opportunity Award, which is funded in part by Wells Fargo.
…Sunrise Banks spent $1.25 million and three years developing TrueConnect with test employers, including Lutheran Social Service of Minnesota, which provides financial counseling to many payday loan customers trapped in debt. Sunrise, which makes 60 percent of its credit available in low-income communities, has signed up 20-plus employers and is expanding TrueConnect to California, Ohio and other states.
Through TrueConnect, offered as an employee benefit, a worker can get a loan of up to $3,000 but no more than 8 percent of total wages. The loan is retired through payroll deductions for up to 12 months. The maximum interest rate is 25 percent over the one-year term. Employers position the loan as something to be tapped in an emergency to cover a car repair, medical bill or other one-time expense [Neal St. Anthony, “Opponents, New Lenders Get Traction Against Payday-Credit Industry,” Minneapolis Star Tribune, 2015.10.05].
Alas, even as Wells Fargo is helping offer moral financial products, it’s also floating big money to the loan sharks:
U.S. Bank and Wells Fargo dropped their payday-like loan products, known as “deposit-advance products” in 2014, under pressure from bank regulators and consumer groups who alleged that they were small-borrower “debt traps.” Both huge financiers still make an unspecified amount of “wholesale loans,” however, to unspecified payday lenders. That’s how payday lenders fund their operations [St. Anthony, 2015.10.05].
Hmmm… looks like I’d better take one of my real 36%-rate-cap petition sheets to my bank tomorrow and lay some guilt on my teller and my mortgage banker.
But hey, pay attention, payday lenders! TrueConnect shows how decent people can offer a decent financial product and get by charging just 25% interest, without trapping people in more debt than they can afford. You’ll want to study that business model, payday lenders, since South Dakota is going to see through your self-serving subterfuge and cap interest rates at 36% next year.
Related Reading: Allied Progress published this report last week showing payday lenders showering a dozen Congresspeople with cash to protect their exploitative racket. The Campaign for Accountability today filed a formal ethics complaint over these apparent votes-for-bucks.