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Second Hope for Payday Loan Victims by Mike Lassiter

Predatory loans, How do you take on this giant absurd practice?

In recent months there has been movement by government entities to reign in payday or title loans. The bottom line is that the blight of this type of ridiculous loan practice continues to thrive at the expense of those finding themselves in a funding crisis requiring some immediate cash.  We were excited when Harold Phillips brought Second Baptist the prospect of an alternative to this type of predatory lending that, as a church, we could support.  So in the late summer of 2016 Second Hope was born at Second Baptist. Over $15,000 was donated by those who believe strongly in not just helping those caught in the predatory loan practice but, hopefully, eliminating the practice of lending with such absurd interest rates all together in this short-term credit industry.

It all starts with the borrowers living on the edge of paycheck to paycheck and being one hospital visit, car repair, or other emergency cash need from the panic to find money somewhere fast.  The short-term credit industry steps in because apparently, that is the only choice some people have available.  Yes, it is a risk for those businesses,  but it doesn't rise to the level of the high-interest rate that the borrowers are charged.  When the borrower can’t make these payments, with already extremely high rates, and pay periods on the loans, are extended the problem spirals out of control.  In Missouri, interest rates can run as high as 495% a year (Kansas City Star article.)

Let me share two real-life scenarios from the Second Hope ministry.  Someone who was working two part-time jobs at minimum wage was involved in a car accident, and because of the age of the automobile, it was totaled.  Insurance didn't offer near enough or soon enough to cover another vehicle purchase, and one of the jobs was lost because of lack of transportation.  Now what? The rent is due.

Scenario two is a homeless family in the Family Promise of the Northland ministry took out a payday loan to buy school supplies for their daughter.  The family made substantial monthly payments for a year, and the principle never changed continuing the burden on them!

Yes, sometimes it is a bad decision by the individual, but mostly it is the life circumstances of being one the countries working poor. 

How Second Hope works is when we become aware of a need, and we determine that we can help, a low-interest loan is made out of our fund managed by the Liberty Teacher's Credit Union. Recipients of the loan, pay off the payday loan and begin making payments to the Second Hope loan that has a 3% interest rate, versus the 495% interest rate they were paying. Our Second Hope volunteers work with the client on budgeting process and learning new money management skills. In most cases, the loan is paid off in a reasonable amount of time and the family is released from the trap of the payday loan cycle.

Thank you, Second Baptist for becoming aware of a problem that can be fixed and showing others that there is an alternative with dignity. This sounds like the gospel doesn’t it?  One of the families who used Second Hope not only paid off the loan last year but they also contributed to the fund out of their gratitude.  One payday loan alternative at a time is how this looming giant can be conquered.
Posted by Mike Lassiter at 6:00 AM
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