Getting ‘stuck’ with payday loans
By JESSICA LOVE
Courtesy of Indiana Capital Chronicle
Have you ever had your car or truck stuck in the mud; and the harder you try to get out, the deeper your tires sink? I have.
So, I know from experience: unless you have the luxury of waiting for things to dry, you’re going to need some help – a push or a pull – to get unstuck.
And you’re probably going to feel a little embarrassed. I mean, technically, even if you had no intention of getting stuck, no one else was driving. Either you didn’t see the danger in front of you, or you thought it wouldn’t be so bad to go through it.
Even if you didn’t have a good way around it, or if you calculated the risk and thought you could get away with it, the fact remains that it happened and you were “at fault”. Thinking back on it, you wish you had done something other than the fix you were looking for – the one that caused your “tires to sink deep in mud and mud” (for others little blue truck fans).
Now imagine that the vehicle you are thinking of represents your family’s financial health and the process of “no longer stuck” as a result of choosing the option to solve your short-term problem yourself – instead of asking for help. or not to think of you had other options – represents a payday loan. The “solution” then becomes a bigger problem to solve than the original problem.
That’s about where the analogy ends, since muddy patches don’t have business models designed to keep you stuck like payday lenders do. It’s by locking people in more that the profits are really made, where the interest rate eventually hits 391% in Indiana. And you really need to find a solution to your solution.
This is why I often refer to the payday loan industry as one of the most subsidized markets in existence – because government and non-profit resources are so often needed to lift people out of disasters caused by payday loans.
What if it didn’t have to be like this?
One way forward is policy change. For now, the onus is largely on Congress, and your legislative action will help make the Fair Credit for Veterans and Consumers Act – which will cap all payday loans at 36% – a reality. You can also ask your state legislators to impose a 36% cap. But until and even after the legislation is passed, many Hoosiers will still need a more responsible way to borrow.
What if there was another route?
What if most of the 88% of Hoosier voters polled who said they would like to see Indiana have a 36% wage rate cap — who are able to provide another way — have paved the way for a solution alternative for their employees and co-workers?
The impact, to reinforce my analogy, would be shattering for Hoosier families who lack the resources to weather a financial shock.
A specific “bypass” – previously available in only 23 counties – recently became available statewide. If you’re a business owner, or an HR representative, or just someone who wants to talk to your boss about providing a financially viable option to those in your workplace, the solution I present to you is the Community Loan Center program.
It is a small, affordable, employer-focused loan program. So what’s the problem ?
Well, as difficult as it may seem, there really isn’t. For companies enrolled in the program, the CLC program is provided as a benefit at no cost to the employer. Employers literally only have to: 1) confirm employment when a loan is requested and 2) set up a payroll deduction in accordance with the employee’s repayment plan. By doing so, they instantly gain employees who are less stressed and more present for their work.
Made available through non-profit organisations, this affordable 12 month loan is designed to get people into or out of debt instead of trapping them. (CLC loans can be used to repay payday loans.) The reason is simple: nonprofit providers offering this program would rather focus their resources on improving a family’s economic trajectory than on bail out from the earthquake that stems from a payday loan.
Just think about how you could bring this alternative to your workplace – and actually help solve a colleague’s short-term financial problem in a way that makes it manageable and gets people out of trouble without getting stuck. .
Jessica Love is Executive Director of Prosperity Indiana, a statewide membership organization for individuals and organizations that strengthen Hoosier communities.