Payday loans multiply — making it hard for consumers to get out from under the weight. (Getty Images/The Indiana Capital Chronicle)
By Jessica Love
Have you ever gotten your car or truck stuck in mud; and the more you try to get out, the deeper your tires sink in? I have.
So, I know from experience: unless you have the luxury of waiting for things to dry out, you’re going to need help – a push or a pull – to get unstuck.
And you’re probably going to feel somewhat embarrassed. I mean, technically, even though you didn’t intend to get stuck, no one else was behind the wheel. You either didn’t see the hazard ahead of you, or you thought it wouldn’t be as bad to go through it as it was.
Even if you didn’t have a good way around it, or calculated the risk and thought you could get yourself through it, the fact remains that it happened, and you were “at fault”. Thinking back, you wish you’d done anything other than the solution you sought – the one that caused your tires to get “sunk down deep in muck and mire” (for fellow Little Blue Truck fans).
Now imagine that the vehicle you’re thinking about represents your family’s financial health, and the process of getting “more stuck” as a result of the option chose to solve your short-term problem yourself – instead of asking for help or not thinking you had other options – represents a payday loan.
The “solution” now becomes a bigger problem to solve than the initial issue.
This is about where the analogy ends, since muddy patches don’t have business models designed to keep you stuck, and payday lenders do. It’s in getting people more stuck that profits are really made, where the interest rate ultimately racks up to 391% in Indiana. And you really have to find a solution to your solution.
This is why I often refer to the payday industry as one of the most subsidized markets in existence – because government and nonprofit resources are so often required to bail people out of the disasters that payday loans cause.
But what if it didn’t have to be that way?
One path to pursue is policy change. At the moment, the burden is largely on Congress, and your legislative outreach will help make the Veterans and Consumers Fair Credit Act – to cap all payday loans at 36 percent – a reality. You can also call on your state legislators to impose a state 36 percent cap. But until and even once legislation is passed, many Hoosiers will still need a more responsible way to borrow.
So, what if there was another route?
What if most of those in the 88 percent of polled Hoosier voters who said they would like to see Indiana have a 36 percent payday rate cap – who are in a position to provide another way – established a pathway to an alternative solution for their employees and coworkers?
The impact, to belabor my analogy, would be earth-shattering for Hoosier families who don’t have the resources to weather a financial shock.
One specific “bypass” – previously available in only 23 counties – has recently become available in Indiana. If you are a business owner, or a human resources rep, or just someone willing to talk to your boss about making a financially sustainable option available to those in your workplace, the solution that I present to you is the Community Loan Center program.
It’s an affordable, employer-based, small dollar loan program. So what’s the catch?
Well, as hard as it may be to believe, there really isn’t one. For companies signed up for the program, the CLC program is provided as an employee benefit at no cost to the employer. Employers literally just need to: 1) confirm employment when a loan is applied for and 2) set up payroll deduction in accordance with the employee’s repayment plan. In doing so, they instantly gain employees that are less stressed and more present for their jobs.
Made available through nonprofits, this affordable, 12-month loan is designed to get or keep people out of debt instead of trapping them in it. (CLC loans can be used to pay off payday loans.) The reason is simple: the nonprofit providers offering this program would rather put their resources towards improving a family’s economic trajectory vs. bailing them out from the quake that comes from a payday loan.
Just consider how you might bring this alternative to your workplace – and actually help solve a colleague’s short-term financial bump in the road in a way that makes it manageable and gets people out of the muck without getting stuck.
Jessica Love is executive director for Prosperity Indiana, a statewide membership organization for individuals and organizations strengthening Hoosier communities. She wrote this commentary for the Indiana Capital Chronicle, a sibling site of the Pennsylvania Capital-Star, where it first appeared.
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