Non-Profit To Offer Low Interest Payday Loans
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UPDATED: Jan 24, 2012
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A new non-profit group called Communities Creating Opportunity is making an effort to create a community credit agency in Kansas City. The credit agency’s goal is to provide low-interest payday loans to consumers who frequent cash advance lenders. They believe they will be a very good alternative to traditional payday loan lenders, as they will provide the same service, but at a maximum interest rate of 36 percent.
The emergence of this non-profit comes at a time when Kansas City volunteers are circulating petitions to include a loan cap on the fall 2012 Missouri ballot.
Interest rates and rollovers are the two largest sources of contention when it comes to payday loans. Lenders who provide this quick, no-credit-check cash claim the high interest rate and rollover fees are crucial to keeping in business and turning a profit. Consumer protection advocates claim such policies propel payday providers into the realm of predatory lending, as they gouge borrowers and trap them in a recurring cycle of debt.
Elliot Clark sides with the consumer protection advocate’s view as he personally experienced the payday loan debt trap. Four years ago, after his wife broke her ankle and was forced out of work for more than four months, Clark turned to a payday loan for help, according to Fox 4 News.
“Eventually one payday loan turned into another and then another,” Clark said. “In a short time frame, I had a total of five payday loans, totaling $2,500 but not being able to pay them all off at one time, I wound up paying them $30,000 over a three year period.”
“That’s in interest,” he clarified.
The largest payday provider in Kansas City, QC Holdings, said if Clark had obtained financing through them, he could have received a two month extension on his two-week loan, at no extra cost. But Clark still supports the Kansas City volunteers’ petitions to establish an interest rate cap of 36 percent.
“Banks have been making money off of 18 percent interest rates, or 21-27 for years,” Clark explained. “But these payday loan companies tell us they can’t survive on 36 percent. Yes, you can. Banks have been doing it for a long time. How come you can’t?”