“Jennifer Trogdon is a mother of five, four with special needs. Her husband works at a fast food restaurant making a little more than minimum wage. She is on disability.
The 39-year-old Springfield woman says her family is trapped, struggling to break free from payday and car title loans.
“It started off with a vehicle repair,” she said. “You don’t qualify for a loan at the bank so you take out this payday loan. They explain it to you and you think it’s not going to be a problem paying back, but you really don’t comprehend it fully. And not having any other option, what else are you supposed to do?”
Trogdon’s dilemma is too common in Springfield, according to members of the Impacting Poverty Commission who took direct aim at what they refer to as “predatory lending institutions.”
The commission issued a call to action for the community’s financial and nonprofit sectors: Work collaboratively to provide lower-interest, alternative loan options.
So far, two Springfield-based organizations have committed to doing just that.
University Heights Baptist Church members dug into their pockets to raise $6,000 for the “University Hope” account at Educational Community Credit Union on East Grand Street. The goal is to raise another $14,000.
And CU Community Credit Union announced Tuesday it will receive a $1.9 million grant in early 2016 to create the “Fresh Start Loan Program.”
Both programs offer small, short-term loans with reasonable interest rates and fees without credit checks. To qualify for either program, the person must have some source of income.
“We talk with them about their finances and their ability to repay,” said Bob Perry, with University Heights Baptist Church. “Typically we are looking at the working poor or retired people.”
In addition to helping folks 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 percent annually, and many lenders don’t allow borrowers to pay toward the principal amount of the loan: it’s either pay the interest payment and fees or pay the entire loan off.
Lenders justify the high rates and strict rules because they offer small loans with no credit checks — something most banks can’t afford to do.
A group of University Heights church members began studying the local poverty problem back in April. To educate themselves, the group attended a poverty simulation, rode city buses, read books and watched videos about 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 felt our church could do something to make a difference for at least a few people. We started with $1,000 from the Deacons’ Benevolence Fund, then we had about 6 church members give $1,000 each to the cause.”
People can borrow small amounts and not worry about a credit check because their loan through Educational Community Credit Union is backed by money in the University Hope fund.
The credit union makes loan. The church’s University Hope fund provides collateral to back the loan.
When the fund reaches the goal amount of $20,000, Perry said it will be able to provide small “rescue loans” to about 40 people at a time.
Less than a month old, the University Hope program has helped three families so far.
The Trogdon family is one of them. For the first time in a couple of years, Jennifer Trogdon has hope of breaking the loan cycle.”
Read more at: News Leader