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Catholic Charities Initiative Helps Kansans Stuck in Predatory Lending Cycle

Originally posted CJonline.com

By Morgan Chilson

Posted Apr 17, 2018 at 8:41 PM
Updated Apr 17, 2018 at 11:45 PM

Hard times hit Bill Coffman as he struggled with mental illness and the theft of $700 he kept in his dresser. To manage, he took out two payday loans, one for $500 and another for $376.

Payday loans are high-interest loans that are expected to be paid off on the next payday. But Coffman, like many people who take out such loans, couldn’t repay the money and rolled the loan over multiple times.

On the $500 loan, Coffman paid more than $1,100. The second loan accrued interest at $7 a day, or $210 per month.

Coffman, a veteran with bachelor’s and master’s degrees who struggles with bipolar disorder, was helped by the Kansas Loan Pool Project, an initiative of Catholic Charities of Northeast Kansas that began operating in Topeka about a year and a half ago. The program was started in Salina by Claudette Humphrey, with Catholic Charities, as she became aware of the “debt trap of predatory lending” and the harm it did to vulnerable Kansans, she said. They would take out the loan, find they couldn’t pay it back in full and roll it over for another month, with interest rates that can reach well over 100 percent.

Coffman shared his story Tuesday on a panel at a community event sponsored by Topeka JUMP and Catholic Charities of Northeast Kansas that included the showing of the movie “Spent: Looking for Change,” which explores the practices and devastation that can be caused by payday and title loans. Also on the panel were Humphrey; Amelia Reyes, with Catholic Charities of Northeast Kansas; the Rev. Carl Frazier, of Southwest Baptist Church; and Jeannette Pryor, a lobbyist for the Kansas Catholic Conference.

KLPP helps qualified people get a loan through local partner banks at 6 percent interest, then works with them to get financial education and rebuild their credit, Humphrey said. In Topeka, loans are through Capital City Bank.

Amelia Reyes, director of asset development for Catholic Charities, said her organization expanded the KLPP program to the Topeka area as it worked with people providing emergency assistance, such as rent, utility payments and food. When they dug deeper into what brought those people and families to a point where they needed help, she said, they discovered predatory loans often upended their ability to pay bills.

Launching the program was a challenge, she added. Many payday loan companies weren’t helpful as KLPP reached out to pay off loans. They refused to give the payoff amounts, changing the amounts when they arrived at a storefront to pay off the loan or, if the payday business was based online, refusing to take certain forms of payment, Reyes said.

“They make it difficult,” she said. “We’ve gotten really good at navigating that system. It’s not fun, but we are starting to figure it out.”

Still, many of the people in predatory lending cycles can’t be helped by KLPP as they must qualify for the program, she said.

“A lot of people that come to us, the No. 1 reason they are denied is because of their debt-to-income ratio,” Reyes said. “But how did you then get approved for a loan that was a 240 percent APR (annual percentage rate) if you cannot then with your budget be able to pay a 6 percent loan? It doesn’t make any sense at all, and it is why people are so desperate and get destitute from being in this situation.”

Anyone interested in learning more about the KLPP and how they can help with high-interest loans can call (913) 433-2050. Reyes said donations supporting the program can be made through Catholic Charities.

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