Missouri Church Creates Ministry Model for Payday Loan Victims

Inside Subprime: May 7, 2019

By Lindsay Frankel

University Heights Baptist Church (UHBC) in Springfield, Missouri, has created a ministry called University Hope to help victims of payday loans and predatory lending overcome their debt.

Predatory lenders often target those who are having trouble making ends meet, offering short-term, low-dollar loans with very few barriers of entry. However, with high interest rates and hidden fees, borrowers often get trapped in a never-ending cycle of debt.

As of April, 653 payday loan firms operate in Missouri. These lenders issued more than 1.6 million payday loans in 2017 to an average of one in four residents. These loans carried an average annual percentage rate (APR) of 462 percent.

“It’s a blight on our community,” UHBC pastor Danny Chisholm said. “Someone can receive a $500 payday loan and pay thousands and thousands of dollars in interest and fees without ever touching the principal amount. We found that to be simply immoral.”

Although the Missouri House Financial Institutions Committee passed a bill last year to rein in predatory lending, it still allows interest rates to increase by 35 percent every two weeks, which can add up to an APR as high as 910 percent. This interest could add up to be several times more than the initial principle of the loan.

In response, the UHBC devised the University Hope program to offer “rescue loans” to those “trapped in a predatory loan of $1,000 or less.” Qualifying candidates are issued a line of credit that is underwritten by the UHBC with a reduced interest rate of between 9.5 and 10 percent. This results in lower monthly payments.

According to the UHBC, 60 borrowers have received rescue loans since 2016, and eight have paid their loan off in full.

In addition to rescue loans, the UHBC, in partnership with a local credit union, also offers small, low-interest loans of $500 to $750 as an alternative to payday loans for those with “urgent income needs,” such as those related to sudden car repairs or medical bills.

“We want to help people regain a sense of hope,” Chisholm said. “For those who have fallen into a debt trap and gotten involved in predatory loans, there’s a lot of shame. You lose some of your dignity. We want to hear people’s stories and help them if we can.”

For more information on scams, predatory lenders and payday loans, see our city and state financial guides including states and cities like Missouri, Columbia, Independence, Jefferson City, Joplin, Kansas City, Springfield, St. Louis.

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