How Vincentians are helping local borrowers saddled with payday, title loan debt

by Jacqueline Burkepile

North Texas Catholic

January 3, 2017

(Kite Rini/Shutterstock.com)

FORT WORTH — As the fight to regulate predatory lenders continues, the Catholic Church is taking immediate steps to help North Texans struggling with the debt of high-interest payday or title loans.

Those interest rates — typically between 200-600 percent — eventually become too much for the borrower to handle, so the Fort Worth District Council of the Society of St. Vincent de Paul launched the Mini-Loan Conversion Program (MLCP). The program helps victims of predatory lenders pay off their high-interest, short-term loan by converting it into a loan with an interest rate lower than 5 percent.

Fort Worth resident Andrea Reed participated in the MLCP pilot program. She has two children, and after her car broke down, she resorted to a payday loan of $450. Reed said her payday lender automatically withdrew $250 from her bank account for five consecutive months. Due to the loan’s excessive fees, she fell behind on her bills and rent. Thanks to MLCP, now her monthly loan payment is $75.

“When they paid off this loan for me, it allowed me to start saving $25 a month. It helps me stay current on rent and bills,” said Reed. “I’m only a nurse’s aide and I don’t make a lot of money. It really helps me all the way around.”

According to the Texas Fair Lending Alliance, the typical payday or auto title loan is a small-dollar, high-cost loan due in full in two weeks to one month. They are usually used to pay for rent, utilities, car repairs, or medical expenses. While the Texas Constitution prohibits charging more than a 10 percent interest rate, these agencies found a legal loophole by registering as Credit Access Businesses under the Credit Services Organization Act.

For example, some lenders may charge a fee of $25 for every $100 borrowed, plus extra fees on a weekly or monthly basis until the loan is paid. These charges result in annual percentage rates of at least 300 percent. With such high fees, borrowers have difficulty paying off the loan principal, resulting in an unending cycle of debt they cannot pay.

On June 2, the Consumer Financial Protection Bureau proposed a rule to end payday “debt traps.” They said “consumers are being set up to fail with loan payments that they are unable to repay,” are “faced with unaffordable payments,” and must choose between “defaulting, re-borrowing, or skipping other financial obligations like rent or basic living expenses...”

Bishop Michael Olson, the Texas Catholic Conference, and Catholic Charities Fort Worth have backed the proposed regulations. No final rule on the regulations has been issued yet.

The MLCP process begins with meetings between representatives from the Society of St. Vincent de Paul and the predatory loan victim. If approved, he must first open a savings account of at least $25 with a financial institution recommended by the society. This savings account shows the society that the borrower is serious about this loan commitment. It also encourages the person to be more financially responsible in the future.

The Society of St. Vincent de Paul grants loans up to $1,500. Minimum payments could be as low as $50 per month, depending on the amount borrowed. The loan’s expected pay off date is between 9-18 months. If it is repaid on time and the client completes a financial literacy class, the society will reward the borrower by returning 10 percent of the loan amount.

Rozanne Veeser, the Fort Worth District Council MLCP administrator for the Society of St. Vincent de Paul, said an SVdP savings account backs up each loan. The account currently holds several thousand dollars completely funded by grants and other donations. This collateral ensures that the credit union does not lose money if an MLCP client defaults.

Veeser added that she hopes this program will help the many people who fall into the traps of payday and car title lenders.

“This is a matter of justice and charity. We need to help those people who are in financial difficulty,” Veeser said. “And we are called as Catholics to help them, so I think it’s important that I take part in this.”

Jim Pace, an MLCP coordinator and a parishioner of Holy Family Church in Fort Worth, helps approve clients for the program.

“Clients must feel despondent to have to face the inability to live within their income. This program gives them the ability to see above ground,” Pace said. “It must be horrible for these people... to wake up in the morning and [think] that they will never get out of debt.”

Father Daniel Kelley, pastor of St. Joseph Church in Arlington, also praised MLCP. He said the program has potential to help many people who are in desperate situations.

“I’ve heard so many stories about people who fell victim to these loans. They lose their cars, their jobs, and eventually become homeless because of this,” Fr. Kelley said. “These payday and car title loans are legalized companies that rob and take advantage of the poor and of people’s desperation. That’s why we need to help these people.”

To learn more about SVdP’s Mini-Loan Conversion program, visit svdpfw.org or call Rozanne Veeser at 817-675-8984.

FORT WORTH — As the fight to regulate predatory lenders continues, the Catholic Church is taking immediate steps to help North Texans struggling with the debt of high-interest payday or title loans.

Published (until 12/27/2035)
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