By BETSY TAYLOR
Our Lady of the Lake Regional Medical Center, Catholic Charities of the Diocese of Baton Rouge, La., and other regional organizations want to help people dig out from under their reliance on high-interest payday loans by offering replacement loans or new loans at a lower rate of interest.
The payday lending industry provides short-term loans to people who have an income, but generally live paycheck to paycheck and usually do not have good credit. The payday loans are small, up to $350 per loan in Louisiana — but the interest and finance charges can be exorbitant, especially if the loan isn't quickly repaid in full. The accumulated interest can exceed the original loan amount.
A microlending program currently under development will allow employees of the Our Lady of the Lake Regional Medical Center and residents in the Diocese of Baton Rouge to apply for loans at a lower rate of interest. Applicants can use the program to refinance existing payday loans or secure a new short-term loan, as a much lower-cost alternative to a payday loan.
The program is expected to roll out this summer.
As currently conceived, loan applications will be processed on the business day they are received, when possible, or within 48 hours. Organizers expect the loans to have a 12-month term to allow for affordable repayment installments.
Coletta Barrett, vice president of mission for Our Lady of the Lake Regional Medical Center in Baton Rouge, and David Aguillard, the executive director of Catholic Charities of the Diocese of Baton Rouge, presented a webinar April 26 that described the effort thus far. It was part of a Healthcare Anchor Network webinar series. The network is a collaboration of more than 35 health care systems working to build inclusive and sustainable local economies. The network is supported through The Democracy Collaborative, an economic research institute.
Representatives from Our Lady of the Lake, Catholic Charities of the Diocese of Baton Rouge and MetroMorphosis began exploring ways to model and fund the loan program in 2014-15. MetroMorphosis is a Baton Rouge nonprofit that works to improve urban communities. The organizations got a grant to hire an outside consultant to write the request for proposals from financial institutions. The organizations selected the New Orleans Firemen's Federal Credit Union from the respondents.
Barrett and Aguillard said the credit union is a community development financial institution, which means it is committed to helping low-income people and communities with affordable loans.
A portion of the initial money to establish the loan program came from unused funds from Our Lady of the Lake employees' flexible spending accounts. Health care system employees can elect to use pretax wages to fund a FSA. Employees can carry over up to $500 in unspent money into the following plan year without losing the funds, but the remainder reverts to the employer.
Barrett received authorization to transfer the balance of FSA accounts to the team member assistance fund, housed in the Our Lady of the Lake Foundation. Dollars from the assistance fund have helped establish The Faith Fund.
Incorporated in Louisiana, the loan program will serve the community and Our Lady of the Lake employees. The credit union will fund the loans, which are guaranteed by money pledged from partners involved in the creation of the program, Barrett said. Applicants will apply to The Faith Fund using the credit union's loan application.
Our Lady of the Lake will screen applicants among its own employees for consideration for receiving a loan. The credit union will screen applicants who are not employees of the medical center. Catholic Charities of the Diocese of Baton Rouge will provide offices and phone lines to support the program. MetroMorphosis will spread the word about the microloan program in the Baton Rouge area.
Aguillard said the loan program will start small, with projections of perhaps two loans a month initially, but with plans to grow.
Barrett and Aguillard said Catholic Charities is screening applicants for an executive director for The Faith Fund; the loan program's board of directors will interview final candidates and make the hire.
Barrett also noted Our Lady of the Lake has long paid more than the minimum wage for entry-level jobs, and it is increasing its entry-level pay from $8.50 an hour to $10 an hour this summer, with plans for additional just wage increases over the next three years.
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