January 22, 2012; Source: Kansas City Star | The Missouri Division of Finance estimates that 2.4 million “payday loans” with interest rates in the triple digits were issued in Missouri in 2010. But now there may be an alternative, at least for a tiny proportion of those seeking such loans.
In partnership with Central Bank of Kansas City, a nonprofit group calling itself Fair Community Credit has just made its first “payday loan” of an expected 500. Fair Community Credit has been in development for three years. It will make loans of $300 to $2,500 on signature alone. The loans are not collateralized by the borrower; Fair Community Credit has a $200,000-plus loan guarantee pool donated by foundations and individual donors that it will be using over its first year of lending. Fair Community Credit’s interest rates will be in the mere double digits, whereas payday loans charge a heartrending 390 percent. There oughta be a law!
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To be eligible for one of the Fair Community Credit loans, applicants must earn a minimum of $9,600 a year and be free of outstanding liens or judgments.
The project is a cooperative effort among banks, credit unions, social service agencies, faith groups, lawyers and foundations. This is clearly a pilot program that aims at establishing a model that can be grown and replicated. –Ruth McCambridge