Local Churches Provide Alternatives to Louisiana Payday Loans
Inside Subprime: May 6, 2019
By Lindsay Frankel
In 2013, a group of churches in Shreveport came together to combat a problem impacting residents of the Highland neighborhood: Financially desperate people were turning to payday loans, which have high interest rates that only exacerbate financial hardship. The results was a program called Hand Up.
“One of our church members was noticing how many payday loan places were here in the neighborhood,” said John Henson, Pastor at Church for the Highlands. “Just looking within a mile radius of this building there were 12 businesses that he counted.”
Highland Center Ministries, a coalition of 14 churches, worked with Pelican State Credit Union to issue the loans to people in need. And the loans provided are a much safer, more affordable alternative to payday loans. People can take out loans with fixed interest rates under 10 percent and use an ATM with relatively low fees. As part of the program, borrowers also work with credit counselors to plan a budget for repayment.
Since the Hand Up loan program was established, it has assisted more than 80 people in accessing $130,000 in low-interest credit. One of the borrowers was Clydel Hall, a homeless veteran who couldn’t get to work without transportation. After taking out a $2,500 loan from the Hand Up program, Hall was able to find financial stability. He now receives steady income from two jobs and owns a home and two cars.
“What we do is work together to provide good, effective alternatives, where they can be involved in something that is going to build their credit and build their lives,” said Henson.
The average APR on Louisiana payday loans is 435 percent, according to data from Pew Charitable Trusts. These predatory loans are advertised as quick-fix solutions to help people manage emergency expenses, but most people can’t afford to pay them back with interest in the time allotted. The Consumer Financial Protection Bureau found that about 80 percent of these loans get renewed or rolled over, leading to an insurmountable cycle of debt.
Payday loan firms cluster in low-income areas of Louisiana, targeting the most vulnerable people. The churches hoped that providing an alternative to payday loans would help the working poor escape or avoid the debt trap.
“Jews, Muslims, Christians, this is part of our scripture that usury is wrong and it is a sin,” Henson said. “It is wrong to hold people who are vulnerable to this kind of debt.”
Highland Center Ministries, a coalition of 14 churches, worked with a credit union to issue the loans to people in need. And the loans provided are a much safer, more affordable alternative to payday loans. People can take out loans with fixed interest rates under 10 percent and use an ATM with relatively low fees. As part of the program, borrowers also work with credit counselors to plan a budget for repayment.
“The money that comes in from them repaying the loan goes back into the pot to help other people who are in need,” said Henson.
The loans have even helped people like Debbie Posey, who had no credit history, build enough credit to be able to borrow from traditional lending sources. For many residents of the Highland neighborhood, the Hand Up program has provided a lifeline.