Payday Loan Writer
Mitzi Rivers stood before a crowd of about 20 bankers and credit union leaders - people who lead boards in Wichita and make headlines in The Wichita Eagle - and told them her personal story of payday loans.
How she had so many that it would take her five hours on payday to go around to all the shops where she had taken out loans to pay them off.
How one day, tired and worn out, the mother of six - who was paying $660 a month in fees to no fax payday loan lenders - decided she needed a better way.
How Communities United Credit Union helped her by developing a budget and giving her a new loan at a lower interest rate that saved her $300 a month.
Rivers spoke Tuesday at a meeting organized by Sunflower Community Action, a grassroots group active in low-income neighborhoods, to encourage banks and credit unions to consider offering small-dollar loans to people trapped by supposedly low fee payday loans.
These small loans would be made available to people such as Rivers - people who live paycheck to paycheck - when a water heater breaks or a tire blows.
Angie Franklin, manager of the Communities United Credit Union, said she’s trying to help as many people like Rivers as she can, but her credit union is small.
The goal of the community development credit union is to help underserved residents in certain neighborhoods by focusing on education.
Franklin told her peers how hard it is to listen to stories such as Rivers’.
“They cry,” Franklin said, “I’m emotional, too, and I cry with them.”
One possible solution has been developed by a credit union in Arkansas, which offers customers a personal loan that is part loan, part savings account. A consumer takes out a $1,000 loan, for example, but only gets $500 back in cash. The other $500 is put in a savings account. The consumer pays back the $1,000, and when he does, he has money in the bank that is gaining interest.
Kevin Shields from the Federal Deposit Insurance Corp.’ s Kansas City office told the group that the chairman of the FDIC, Sheila Bair, is supportive of more traditional financial institutions reaching out to underserved people in their communities.
And there may be an incentive for it: the Community Reinvestment Act. That federal law encourages depository institutions to help meet the credit needs of the communities they serve.
Rob Allison, Bank of America’s Kansas president, said it’s too early to tell whether his bank would be interested in offering alternative products. But he said reinvestment act credit could definitely be an incentive.
“It’s very important to banks to get high ratings in community reinvestment,” Allison said.
He said he plans to take what he learned Tuesday back to others at his bank.
“It’s just too early,” he said. “But I think it was certainly an informative meeting.”
Lyndon Wells, executive vice president at Intrust Bank, said demand for small-dollar loans seems to exist. Many quick cash loan customers say they go to such lenders because banks don’t offer small-dollar loans. Such loans aren’t lucrative to banks.
“We certainly think that there might be a place for this kind of thing,” Wells said.
He agreed with speakers at the meeting that financial education must be a priority.
“I believe that a lot of people - not just payday loan customers - need financial education to understand the significance of their financial behavior,” Wells said.
Intrust has asked Sunflower to “help introduce us in the neighborhoods and communities they represent so they know we’re interested in visiting with people.”
Whitney Damron, a lobbyist for the Kansas Payday Loan Association, wasn’t at Tuesday’s meeting but said “we certainly think that it is entirely appropriate” for banks and credit unions to look at getting into some kind of “microloan” business in lieu of cash advance loans.
“Certainly we would welcome and encourage consumers to consider all options for their needs,” Damron said.
Franklin was encouraged that bankers turned out for the meeting.
“I think it was an eye-opener for some of them,” she said.