Step Up program offers employer-based low-interest loan program

July 7th, 2015 by

Article written by Jan Skutch for  Savannah Morning News

When those out-of-the-blue bills hit, home workers are frequently left with few options other than high-interest rate lenders.

Under a new program recently rolled out here, Step Up Savannah Inc. is joining forces with Georgia Heritage Federal Credit Union and Consumer Credit Counseling Services and a list of employers to offer employees an easy-to-access “small-dollar loan program.”

The plan is employer-based and offers employees between $300 and $1,500 at a reasonable rate, repaid through a paycheck deduction. And a bad or no credit score is not a bar to getting the loan.

“It’s open to all employees,” said Robyn Wainner, Step Up’s director of Asset Building & Financial Empowerment. “We understand that many folks need money if the car breaks down or kids need money for summer camp,” Wainner said. “We really are trying to provide an alternative to people who don’t have alternatives.”

The program is accessible through the employer’s human resources departments and based on simple criteria — the employee works there at least six months and is in good standing, she said. The loan is processed through the credit union individually with the employee getting money same day or 24-48 hours, Wainner said.

“They pay the loan back through direct payroll deductions” over a six- to 12-month period, and the consistent payments work to improve the employee’s credit as he or she goes. An added benefit of the program is that once the loan is repaid, the deductions that had been coming out of the employee’s paycheck can then go directly into a savings account until the employee opts out.

And the program allows the Consumer Credit Counseling Services to assist the employee with financial education efforts to make improvements down the road. Robby Glore, vice president for operations at Georgia Heritage Federal Credit Union, said the program “fits like a glove for us,” adding the credit union’s motto is “People helping people.”

“We are a local credit union serv ing Bryan, Effingham and Chatham counties,” he said. “The only bond we have is with the employers.”

He said the credit union has money to lend, pointing out that the institution’s money comes from its members. Georgia Heritage offers 16.9 percent annual percentage rate for payroll deductions, 18 percent for cash repayments, as opposed to 187.5 percent annual rate for car-title loans, Glore said.

“Based on a $1,000 loan, I can save them $1,100 a year over the alternative finance companies,” he said. “This is a whole lot cheaper interest rate.” “These are people who really need that money,” Glore said.

In addition to the interest savings, the program offers participants a way “to get back on a sound financial footing,” he added. Officials said the program is available to all employers. The largest partner on board is the Chatham Area Transit Authority and its 236 employees, CAT marketing manager Shalonda Rountree said the program offers them an opportunity to “encourage participation by employees whose credit history would not allow for approval from traditional loan programs, and who may resort to obtaining extremely high interest and fees by resorting to alternative or car-title loans.”

“Since the introduction of the program at the end of May, the Life Line Loan Program has been a huge success,” Roundtree said, adding that 27 employees have already applied to participate. One of the employers early on in the program was Hospice Savannah and its 205 employees.

Ron Williams, Hospice human resources director, said his nonprofit attended a seminar in March at the Savannah Morning News and saw the program as having potential “for it to be a good benefit for our employees.” Hospice officials were seeing employees facing unexpected “financial binds” to look to their retirement accounts to make up shortfalls, he said.

“We wanted them to have another option so they would not have to go to their retirement for extra money,” Williams said. “Every employee is eligible for the loan program. The credit union will pull credit reports but your credit score does not prohibit you from getting a loan.

Since we rolled it out two weeks ago “at least five or six of our employees have already applied for loans and several more have asked about the program,” Williams said.

“It seems to be” working for the employees, he said.

Do they seem to like it? he is asked.

“Yes, they do.”

Credit Union Hero

May 28th, 2015 by

It’s not often that a financial institution is a protagonist. But in Savannah, Georgia Heritage Federal Credit Union came through like a hero this year, working with Step Up to create a new loan product aimed at low-wage employees.

More than 60 percent of Chatham County residents have sub-prime credit; thousands of residents remain stuck in a cash-based economy (albeit some by choice, others due to mistakes or, yes, bad choices) and at least 10 percent are completely unbanked. Many — truly untold numbers, since there is no straightforward way to count these individuals — are working full or part-time. For several years, Step Up staff and our partners have tried to identify ways to connect our working poor, some barely a paycheck away from poverty, to public benefits they’re eligible to receive that effectively boost their earnings. A significant opportunity has existed among thousands of wage-earners who find themselves in need of a small-dollar loan but who don’t have credit or whose bad credit translates into exorbitant interest rates.

When a life emergency or unanticipated need pops up, most employees ask for payroll advances, borrow from retirement plans, or turn to the unregulated car title loan industry.

Step Up has urged banks and credit unions to consider offering a safe loan product through area employers. Georgia Heritage recently stepped up. Employers can now offer through the credit union loans of $300-$1500 to those who have been employed in good standing at their companies for 6 months or more. No questions asked, no fees, and monthly payments are determined by the credit union and borrower, with amounts processed through payroll deduction. Credit scores are not part of the determination process and payments are recorded at credit bureaus so these employees can build a positive credit record. Further, once the loan is repaid, the auto deductions continue with payments going to the employee’s savings account. They can easily opt out of course but once individuals get accustomed to not having that $50 or $100 available, they typically keep it up, and in this case building savings.

Chatham Area Transit, Hospice Savannah, and Chatham County are employers who are on board, or just about, with the Life Line Loan. Step Up will be gathering data to document what works– or doesn’t– about this loan product. But we know that it won’t bury in more debt those who can least afford it, like the car title loan.

To learn more about our Life Line Loan, contact Robyn at rwainner@stepupsavannah.org