Claudette Humphrey Almaraz, the Kansas Loan Pool Project Coordinator, has one main goal as she works to establish community collaborations and phases this "microloan" program into five Kansas communities within the Salina Diocese. "My main goal is to help those individuals who have been victimized by predatory lending companies to find a way out of the cycle of poverty that these types of loans work so hard to maintain." She added, "They target people in desperate situations who then utilize these payday or title loans to keep the lights on or to fix the car so they can get back and forth to work."
The Kansas Loan Pool Project (KLPP) is collaborating with Sunflower Band to offer lower-interest microloans to customers to pay off these extremely high-interest loans while also giving the person the opportunity to develop a positive banking relationship, which will help them to repair their credit. The loans are guaranteed by a $25, 000 grant from the United Methodist Health Fund with a Catholic Charities match amount. The goal of the program is 90% repayment in full by the consumer.
In addition, consumers of this project will have to attend a mandatory financial class prior to being funded. Additionally, every client is required to participate in a monthly Leadership Circle/Financial Health Support Group. "We want to promote positive behavior change in the consumers of the KLPP. We want to help them understand their finances in such a way that their chance of recidivism to predatory lending is minimal."
A payday loan is a high-interest, short-term loan backed only by a personal check or checking account debit card with the understanding the check will be deposited or the account debited on the customer's next payday. The requirements to qualify are almost non-existent and there is no discussion with the customer as to whether they will be able to afford to repay the loan in its entirety by the next pay day. These loans have an APR of, in some cases, up to 400%! Many borrowers "re-loan" pay day after pay day simply because they cannot afford to pay the loan off. As an example, a loan of $500 will cost the customer $75 every two weeks for a grand total of $1, 800 in interest over the course of one year after which the customer still has the outstanding principal of $500. According to national data, payday lending is estimated to cost Americans in excess of $3 billion each year.
"For the person who has never used or even thought about using this type of loan, it may seem to them this is not their issue, but they are mistaken. Poverty is an issue that affects all of us because FINANCIAL instability causes FAMILY instability and these families live and work in our communities. We simply cannot, especially as Christians, sit by while our neighbors are being strategically targeted and victimized by predatory lenders. In effect, it is nothing more than modern-day loan sharking and our legislators say it's legal. That is why the long-term goal of the KLPP is to make a concerted effort to work with legislators to change the laws regulating predatory lending practices in the state of Kansas."
The KLPP offers this program in five communities within the Salina Diocese. Additionally, the KLPP Decision-Making Board is made up of citizens who have the same vision for the short and long-term goals of the project. In addition, the board requires that 50% of its members are lower income as required by Catholic Campaign for Human Development, another grant partner in the project. This insures those most affected by the predatory lenders will have a voice in the program's direction.
Payday loans in Australia are part of the small loans market, which was estimated in 2008 to be between $800m and $1bn a year, although it seems likely that the true market was and currently is higher than this.
The growth of this market mirrors the growth in Canada, the United Kingdom, and the United States. Because the market for small loans...
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