Have you ever paid a 175% interest rate on a loan? Unfortunately, there are many people in our community faced with this reality. Recently 70-year-old Iris Burdine found herself in this situation and didn’t know where to turn.
Iris’ story could happen to any of us if we are not careful. Several months ago, her car died and she needed transportation. Estimates for repairing the vehicle were extensive and she had no financing options. So, Iris visited several used car lots to find an affordable vehicle. Ultimately, she found a used Chevrolet with over 70,000 miles and a sticker price of $9,595. Before it was all said and done the dealer added other fees totaling more than $15,000 for a car valued at $7,000.
And that is just where the story begins. To add context, Iris is retired and lives off her monthly social security check of $752. Now with the car payment she had to pay $445 of her monthly income. While the first month went smoothly, in the second month Iris could not keep up with the payments. This forced her to borrow money to make the car payment.
Across Greenville you can find storefronts with bold signs offering quick loans and check cashing. These predatory businesses are generally located in areas where folks are unbanked and have limited banking options. When Iris couldn’t make her car payment, she visited one of these places. In a matter of minutes, she walked out with a loan for $1,735 adding a payment of $275 per month. That equates to more than 175% interest…and left Iris with only $30 per month from her social security check.
Where can you turn if this happens to you? In Iris’ case, she found a solution when she stopped in at Self-Help Credit Union. Self-Help is a nonprofit financial institution that has been working to build stronger communities and economic opportunity for all since 1980. Today the organization has more than 150,000 members with branches in seven states across the country. In Greenville, Self-Help is located at 115 Antrim Drive.
Self-Help provides responsible financial services, lends to small businesses and nonprofits, develops real estate and promotes fair financial practices. While the organization benefits communities of all kinds, its focus is on those that may be underserved by conventional lenders, including people of color, women, working families, rural residents and low-wealth families and communities.
Iris had definitely found the right place! She met with Self-Help loan officer, David Finley, who helped her refinance these loans. Iris actually has a good credit rating, which positioned her to get a good interest rate. Today her total monthly loan payments have been reduced to $296.13 from $721.09 leaving her with $494.87 from her monthly social security check. Instead of paying 175% she is now paying 12.9%.
In addition, Self -Help has referred Iris to the Greenville Financial Empowerment Center to start working with a financial education coach to help her avoid predatory institutions and begin building healthy savings habits. This is a success story for Iris, however, predatory lending practices continue to impact so many innocent folks in our community and across South Carolina.
In order to get to the root of the problem, Self-Help is now working on safeguards for South Carolina’s citizens. Predatory payday loans are a relatively new product, one that arrived in most states in the last 25 years. While some states never allowed payday or car title lenders to entrap their citizens, others, like North Carolina and Georgia, have put a stop to the practice. In November, State Representative J.A. Moore of Berkeley and Charleston counties pre-filed a bill entitled the “South Carolina Predatory Practice Protection Act.”
The bill would require a short-term loan lender to provide a financial literacy course before making a loan or undertaking collections after a default on a loan. It would also require a lender to establish a good faith belief that the borrower can afford the short-term loan based on certain factors, which may include an examination of income and expenses, and set a limit for the annual percentage rate for a short-term loan. This legislation is an important first step, and Self-Help Credit Union stands ready to work closely with faith, community, and veteran partners to strengthen the bill and help pass it.
As we wait for our legislators to take action on this bill, Iris shares advice with others who may be faced with outrageous interest rates offered by predatory lenders, “It is difficult to think when they are rushing you to make a decision. These folks know how to talk, and they make their loans sound great. Always take your time and talk to others about other options. A Credit Union, like Self-Help, is the best place to go, You can trust them.”
“Unfortunately, Iris’ story is far too common. We work with people every day who are faced with upside down loans.” explained Kerri Smith, city executive at Self-Help-Credit Union in Greenville. “South Carolina lawmakers, please pay attention to what is happening across our state. We must stop this exploitation of our citizens, especially the elderly.”