Part 5: Community Loan Center working to provide an alternative to Pay Day loans
(Note: This is Part 5 in a series on Pay Day lending and its effect on our Waco community. For the rest of the series, click here: Pay Day Lending in Waco. — ABT)
By Shannon Kendrick-Wittmer,
To many people, Goodwill is synonymous with thrift store, a place to find discounted clothing, furniture, or other treasures discarded by someone looking to declutter their house or make room in their closet. What most individuals don’t realize is that by donating gently used items or shopping at a Goodwill retail store, people are helping Goodwill achieve their primary mission: putting people to work. The money spent on purchases at Goodwill stays in the local community and is used to fund various employment, education, and training programs to help individuals get a job, improve their skills, and become self-sufficient. Heart of Texas Goodwill’s Learning Center services focus on job attainment, job retention, and skills building. Participants can get help improving their interview skills techniques, creating a resume, searching for a job or they can attend one of our many classes, such as Microsoft Word and Excel, GED, ESL, Parenting, and Anger Management.
While helping people gain the skills necessary to land a job is our main mission, we also recognize that we can’t help someone find a job without giving them the skills necessary to manage the money they earn. For many years, we have provided one-on-one budgeting services, financial literacy classes, and education on the pitfalls of using pay day lending, but we still encounter a large number of our participants who have fallen into debt because of the need to utilize pay day lenders for quick cash. This is a scenario playing out at many other social service agencies around Texas. At the state level, the 15 Goodwill agencies in Texas joined together, on numerous congressional years, to introduce bills that would enforce regulation of Pay Day lenders in Texas. Each time legislation was introduced, it was voted down.
Heart of Texas Goodwill, along with the other Goodwill’s in Texas, decided to focus efforts concerning pay day (predatory lending) at the local level. About this time the Citizens for Responsible Lending had their first meeting. It wasn’t long before we realized that our organization’s role could be to offer an alternative to pay day lending in the Waco area, in the form of the Community Loan Center.
There has been a lot of buzz in Waco lately about the Community Loan Center, who can utilize it, and how Goodwill is involved. Although it is still in its infancy in Waco, we foresee it as being a viable alternative to certain people needing access to cash quickly.
So what is the Community Loan Center (CLC)? The CLC Small Dollar Loan Program is an employer-based small dollar loan program administered through local nonprofits in Texas. The CLC recruits local employers to participate, at no cost, and the program is then marketed to the employer’s employees. Employees who participate are able to borrow up to $1,000 at 18% interest with up to 12 months to repay the loan. Employees can apply for the loan using an online portal and once approved, the funds are wired into their personal bank accounts. Repayment of the loan is done through payroll deduction, set up by the employer.
What is Goodwill’s role in the CLC? Heart of Texas Goodwill has committed to being the non-profit administrator of the Community Loan Center. As the administrator of the CLC, we will be responsible for recruiting area employers to sign up for the program, assisting those employers in marketing the program to their employees, and raising funds to be used as capital for the loans made to employees. Heart of Texas Goodwill Industries made the decision to create a separate 501c3 corporation for the new company, which will be named the Community Loan Center of the Heart of Texas. A board of directors have been appointed to govern this corporation and administrative duties will be handled by existing staff employed by Goodwill.
Where does the money come from to issue loans? The loan capital used by the CLC can come from a variety of sources, such as grants, investors, or low interest loans from banks. Heart of Texas Goodwill Industries, along with other community members, will be working continuously to seek funding sources for the capital pool. As the funds increase, more employers can be added to the program, therefore increasing the number of employees with access to the small dollar, low interest loans.
Why is the interest rate 18%? This may seem high to some people but it very modest in comparison to the 400%-600% charged by pay day lenders for similar loans. The 18% interest fee covers various items such as: administrative costs to run the program, defaulted loans, and interest payments for loans used in the capital pool. This interest rate also helps to increase the amount of money available in the capital pool.
Who can take part in the program? Only employees working for employers who have signed up for the program are eligible to take a small dollar loan through the Community Loan Center of the Heart of Texas. Currently, in the Waco area, the only employers enrolled in the program are the City of Waco and Waco ISD. Employees working for these entities may take a small dollar loan. At this time there is only enough money in the capital pool to cover these two employers. When we have more money in the capital pool, we can add more employers.
The Community Loan Center of the Heart of Texas will not eradicate pay day lenders all together, but we strongly believe it is a step in the right direction toward a more financially secure community. It provides people who need a small loan quickly an alternative to payday lending. We hope to see the program grow in the future to include many more employers. To that end we welcome the help of anyone in the community wanting to assist us in fundraising, which will be a key factor in growing the CLC in Waco. Anyone with questions about the Community Loan Center may contact me at the Goodwill Corporate Headquarters in Waco at 254-753-7337.
Shannon Kendrick-Wittmer is the Vice President of Mission and Workforce Advancement at Heart of Texas Goodwill Industries. She has a BA in Psychology from Baylor University and a Master’s in Business Administration from Tarleton State University. She has lived in Waco for the past 15 years, worked at Goodwill for 11 years, and has been married for a year and a half to Jonathon Wittmer, a field engineer with TYMCO.
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