South Bend area nonprofits and social service groups on Wednesday met to hear about a new effort to help people at lower incomes get more affordable access to capital.
Payday lenders offer quick access to cash but borrowers often can’t afford to repay their loans right away, so they end up paying annual interest rates up to 400% under Indiana law.
Sam Centellas is executive director of CDFI Friendly South Bend, a nonprofit that works to connect lenders with low-income borrowers. He hosted the information session at the Near Northwest Neighborhood’s community center.
“I tell people, guess what the capped interest rate is on payday lending, and most people are like oh, 30 or 40 or 50%?" Centellas says. "I’m like, there are credit cards that are in that range, that’s not what this is. And then when I tell them it’s almost 400%, people just can’t believe it.”
Centellas says the nonprofit Brightpoint Development Fund, a Community Development Financial Institution in Fort Wayne, is launching a new Community Loan Center program. Participating employers effectively give employees payday advances up to $1,000, at no cost to the employer since the capital comes from Brightpoint.
Local banks and credit unions also attended the meeting. Payday lenders typically target people who lack checking accounts, also charging them high fees to process utility bill payments.
“We can help you get banked so that way you don’t fall prey to some of these things that can ultimately draw sometimes thousands of dollars away per year from somebody who’s low-income, that that really makes a huge difference for them.”
