This program aims to keep the payday lending industry out of business: Ipass

The Black Clergy Collaborative of Memphis and Hope Credit Union will start the “Borrow and Save” program they hope to make an alternative to predatory lenders. Photo by Andrea Morales for MLK50 for emergencies ( )

The people who struggle to meet their financial obligations will have a better option for payday loans thanks to a new partnership announced this week by Hope Credit Union and the Black Clergy Collaborative of Memphis and Hope Credit Union.

“Borrow and Save” program “Borrow and Save” program gives low-interest loans of up to $1,000 so that residents can stay clear of predatory loans that can turn into the source of debt, according to the Rev. Dr. J. Lawrence Turner, who is the senior leader of the Mississippi Boulevard Christian Church (Disciples of Christ) which is a co-member.

“Many Memphians have been forced to obtain payday loans to meet financial emergencies,” Turner stated in an announcement. “But relying on payday loans ends today.”

Shelby County has the highest number of predatory lenders — at 232 in the state, according to a 2017 Metro Ideas Project study. These lenders include payday lenders and title pledge lenders. They also offer flexible credit as well as check cashers.

“We know that payday lenders put their businesses in low-income Black and brown areas because those are the people who … have that greatest need,” said Shirley Bond, executive director of the collaboration.

But, even after accounting for the impact of income and other variables, the payday loan industry is more focused on Black and Brown communities, according to a study conducted by California cash-lenders, as per the report from 2009. Center for Responsible Lending report.

There is the need for short-term loans, Bondon said, “but the interest rates they require of our people are robbing the community of millions that could be used to improve our communities.”

According to research from Pew Charitable Trusts, the typical payday loan is $375 and 391% interest. In Tennessee, which is the place that gave birth to the concept of payday lending, it is a payday state where loan amounts are capped at $425. Businesses can charge a maximum interest rate of almost 460% following The Metro Ideas Project study.

Memphis has a high proportion of people living below the poverty line and underbanked, making Memphis an ideal lender with predatory lending, according to Latoya Brewer Hope Credit Union’s vice-president Regional Branch Administrator, who has been helping London to establish the program.

In Memphis, where two-thirds of the population is Black In Memphis, about 1 of 3 residents are unbanked, which means that they don’t have a banking account or are not banked, which means they are using financial services like payday loans in addition to traditional banks, as per a Prosperity Analysis of 2017 data from the federal government.

One step in the uphill struggle

For many years, county and city lawmakers have wrestled over the issue. In 2009, the two lawmakers passed an ordinance banning payday lenders from being within 1000 feet of homes. In September, Memphis City Council passed a resolution to ban payday lenders. Memphis City Council passed a resolution requesting the state to prohibit the firms. City Councilor Chase Carlisle, who brought the answer, pointed out that the city had limited options because the state licenses payday lenders.

State laws that favor payday lenders and are favorably due to the well-funded lobbying generally preempt local government’s choices, Metro Ideas Project researchers found. But, cities do have options, as evidenced by three suggestions made in the report. Make sure that storefronts have clear-language warnings and signs, demand the city to issue a permit, and promote competitive alternatives.

A competitive alternative is what Bondon hopes to offer when she plans to launch an attack on companies that she claims are the cause of poverty cycles.

How will the program work?

The potential borrower must request the referral of the BCCM coordinator in any BCCM member church. The list of BCCM church members will be posted via the BCCM website once the program is launched.

If approved, applicants can choose to get a loan of $500 over six months, or $1000 for 12 months, at an annual interest rate of 6-8% to 18 percent. At the same time, half of the loan will be paid directly to the borrower, while the rest will be placed in an account for savings. When the loan is paid back by the borrower, the borrower will be granted access to the second part of the loan and any interest accrued on the half that’s in savings.

A borrower can only take one loan at a given time; however, there is no limit on the number of loans one can get. Following the first loan, it will be required by the program applicants to attend financial literacy classes to decrease their dependence on loans for short-term purposes, Bondon said.

“This is a pathway to help us help people stabilize their financial lives and help them climb the economic ladder by borrowing for their short-term needs and saving at the same time,” Brewer added.

Bondon and Brewer anticipate accepting applications within six to eight weeks.

They will also be covered with a trust fund established by BCCM BCCM and will be matched by Hope. BCCM has already raised 10,000 to begin the program. However, London is looking to raise $40,000.

Their church congregations may be members who pay dues to the collaborative or deposit $2,000 into the fund to allow them access.

The Black Clergy Collaborative, founded by Turner and headed by Bondon, is comprised of mostly Memphis Black churches and focused on alleviating the level of poverty. Being a religious person is much more than charity, Bondon said. It’s also about seeking justice.

“We are responsible for one another … and this issue speaks directly to that,” Bondon declared. “If we are responsible for our brothers and sisters… we cannot stand and watch as they’re being exploited by others.”

Mary H. Martino