The City of Dallas And Local Non-Profit Launching Affordable Alternative To Payday Loans
In collaboration with the City of Dallas, Business and Community Lenders (BCL) of Texas held a press conference to announce the launch of a new Community Loan Center (CLC) of Dallas, an employer-based program which will provide affordable small dollar loans as an alternative to high-interest, short-term payday and auto title loans.
Program staff was available to answer questions regarding the need for the program as well as discuss features of the loans and projected outcomes for Dallas.
According to BCL of Texas, in Dallas alone, over 175 payday lenders are operating in what is a $5.9 billion dollar industry in Texas. According to the Office of the Consumer Credit Commissioner, $271 million in fees were charged to Dallas MSA residents in 2013.
In light of increasing regulation on the payday and auto title lending industry within Texas communities, the Community Loan Center will offer an affordable and sustainable alternative loan program, with opportunities to scale and replicate the program in other communities throughout Texas. The City of Dallas supports this program as a community friendly program to combat and reduce asset poverty in Dallas.
A crowd funding campaign for the Community Loan Center of Texas is underway on Indiegogo to raise funds for a new consumer loan product specifically created as an alternative to high-interest, short-term payday and auto title loans. Funds will be used to start a pool of capital for the new small dollar loan program, which will soon be launched in Dallas, Austin, Houston, Laredo, College Station and Odessa, with more communities to be added as the program grows.
Local non-profit Business & Community Lenders (BCL) of Texas is administering the Community Loan Center program in Dallas and Austin, which will provide consumer loans of up to $1,000 to employees of participating employers with no collateral or credit check. Interest rates are capped at 18% and borrowers have up to a year to pay back the loan through payroll deduction, in contrast with the typical payday or auto title loan which have much shorter terms and typically collect between 250% to 800% interest. Additionally, BCL of Texas will also provide financial counseling to borrowers upon request through their non-profit partners, helping borrowers to achieve financial stability and escape the cycle of debt brought on by short-term loans.
“The extremely short terms of payday and auto title loans often trap consumers into situations in which they find they can only pay the interest when the loan comes due, forcing them to carry the principal balance far longer than they originally intended to and costing them much more in fees and interest than they were initially expecting to pay,” says Rosa Rios Valdez, CEO of BCL of Texas. “We’re pleased to be able to participate in bringing this innovative program to the rest of Texas, and look forward to seeing the impact of the program on families who would otherwise have no other options but to seek a high-interest, short-term loan.”
