Nonprofit leads charge to loan alternatives

FUND RAISING: Frustrated with getting payday-loan controls passed in Rhode Island, some activists launched a nonprofit, Capital Good Fund. Pictured above is Capital Good Fund Loan Systems Manager Jose Fonseca. / PBN PHOTO/RUPERT WHITELEY
FUND RAISING: Frustrated with getting payday-loan controls passed in Rhode Island, some activists launched a nonprofit, Capital Good Fund. Pictured above is Capital Good Fund Loan Systems Manager Jose Fonseca. / PBN PHOTO/RUPERT WHITELEY

For more than four years now, a coalition of anti-poverty activists has been pushing for controls on neighborhood payday-loan shops that lend cash for two weeks at an astonishingly high interest rate.
While the many shops advertise easy-to-get two-week loans at an interest rate of just 10 percent, their critics charge that’s deception. Extend the typical interest charge to a year, and the rate jumps to 260 percent. That can put some low-income borrowers on a debt treadmill: They repay the loan, but the high interest charge leaves them strapped for cash and they’re soon borrowing again.
Frustrated with getting controls passed in Rhode Island, some activists have gone another route: they’ve launched a nonprofit, Capital Good Fund, that’s in the business of making unsecured loans of up to $500. That’s the same amount payday lenders typically loan, but CGF offers a 12-month repayment schedule with lower interest fees.
“We charge 30 APR, plus a 4 percent closing fee,” said Executive Director Andrew Posner. “Since we began in November 2013, we’ve given [more than] 100 loans. Our goal is to get people away from payday lenders. They’ve already loaned money to more than 20,000 people in Rhode Island. It’s a big business.”
For the record, at Statehouse hearings, payday lenders have always maintained their rates are fair. They also claim to provide a necessary service: without their quick and easy loans, some Rhode Islanders could possibly face high credit card late fees, overdraft charges, the shutoff of utility services, or eviction.
To launch the nonprofit lending program, CGF collected donations from businesses, including Bank RI, Webster Bank and Walmart; a number of philanthropic organizations, such as the Hassenfeld Family Fund and the Rhode Island Foundation and a few individuals.
“For the past four years, a coalition has been pushing for legislation that would cap the interest rate at 36 APR,” Posner said. “The United Way of Rhode Island suggested that until that happens, we offer people an alternative.”
The CGF offers other innovative programs as well. Consumers can borrow up to $5,000 to make their home more energy efficient, or up to $2,000 for personal uses, such as car repairs, buying a computer, or applying for U.S. citizenship. The credit-building loans can be repaid over two years’ time, at a 20 percent interest rate, with no minimum credit score requirement.
Families can also sign up for financial coaching. “What’s unique is that we’ve included a health care component,” Posner said. “We help people get access to primary care. We talk about eating on a budget.”
Thus far Rhode Island is the only state with such a program, but Posner predicts that could soon change. “We’ve brought a lot of attention to the state,” he said. “All around the country, people are looking for alternatives to payday loans.”

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