Despite the bad reputation that payday loan stores have, Kevin Slot and the Rev. Charles Jackson aren’t looking to drive payday lenders out of business.
Instead, their new organization, In God We Trust referral service, simply provides an alternative for “financially desperate” people.
“I’m just grieved whenever I ride by one of those payday loan businesses,” says Slot, who owns Tailored Printing in Springfield.
Slot says the idea came to him early one Sunday morning as he rode his bicycle down MacArthur Blvd., the location of a half-dozen of the city’s roughly 40 quick-cash stores.
As a result of efforts by residents and business owners near MacArthur, the Springfield city council recently enacted an ordinance prohibiting new payday loan establishments from locating within 1,500 feet of existing ones.
Critics characterize the practices of payday loan businesses, including the charging of triple-digit annual interest rates, as predatory. The payday loan industry counters by pointing out that even a $1 bank transaction fee could be expressed as an annual percentage rate of 365 percent.
“Nobody that I know of is going bankrupt because of ATM fees,” Slot says.
Slot and Rev. Jackson, pastor of St. John AME church, are currently scouting for a location for In God We Trust along MacArthur. A mockup of the proposed storefront mimics the sometimes garish signage of payday loan stores.
“We want to be just as visible,” Rev. Jackson says.
In God We Trust would be a referral service first and foremost. When clients walk through the doors, they would be greeted by a financial counselor to assess their needs.
The first option would be to educate clients about existing community programs. For example, if their electricity is facing disconnection IGWT might tell the client about the partnership that City, Water, Light and Power has with Land of Lincoln Goodwill that lets utility customers work off their debts.
If the situation is dire, the client would start the process of taking out a loan. The plan is for IGWT to team up with local credit unions to provide loans of $300 to $500. The organization would lend the money interest-free and recover its costs through grants and private donations.
Rev. Jackson and Slot describe the process as akin to that of Habitat for Humanity, which pays the interest for its clients.
All IGWT clients would have to go through a financial coaching course, perhaps in a group setting, to help people break bad financial habits that led them to using payday loan services in the first place.
Rev. Jackson’s church maintains a benevolence fund to help parishioners down on their luck, but he says people are sometimes too ashamed to admit they need help.
“It’s a secret thing. People don’t tell you sometimes until they’ve gone over the cliff,” he says. But hearing the stories of others in similar situations, he says, could help people regain the confidence to pull themselves out of negative situations.
The organization is incorporated by the state and is in the process of applying for 501(c)(3) tax status. They’re working on a business plan and hope to be up and running by the end of 2009 or sooner.
IGWT is also putting together a board of directors and is looking for volunteer financial crisis coaches, grant writers and an executive director.
Says Slot: “Scripture says the borrower is the slave of the lender. We’re setting the borrower free.”