Sometimes people find themselves in such desperate times and spaces, trying to make ends meet, that they turn to predatory lenders like payday loans. These lenders are willing to give people the money they need but at what cost? People who take out a payday or other predatory loans often get trapped into paying excessive interest rates, unreasonable fees, and certain additional charges. Investopedia explains predatory lending as "lending practices that impose unfair, deceptive, or abusive loan terms on borrowers." These tactics are harmful and strip victims of their equity. Some of the interest on these loans are upwards of 500%.
According to a report published in 2018 by Metro Ideas Project (MIP), there are 71 predatory lenders in Hamilton County, TN. That means that there are 71 lenders in Hamilton County alone, who are feeding on the needs of the community.
Experiencing a call to be the church in the world, St. Luke United Methodist Church (UMC) has developed a microlending program, Loans to Neighbors.
"The project began with a sermon about a young mother being assisted by our church. She had a job and a child on the way and needed to move from a by-the-week motel to a safer and more economical apartment. While the church could find furniture and supplies to get her started, (St. Luke) came to realize the barriers she was facing were the deposits required for the apartment and utilities. Her job paid better than minimum wage, but it did not pay her enough to provide for her family and save for housing. This got St. Luke thinking about a loan for the deposits and other obstacles she faced in researching loans to the working poor. St. Luke then mailed approximately 875 letters to churches and non-profits in Hamilton County asking if there was a loan program targeted at helping low-income earners in Hamilton County improve their lives by gaining access to capital. (St. Luke) found that there are only a few agencies offering limited amounts to individuals on a case-by-case basis."
A concerned member and the pastor of St. Luke developed the program to get people the help they need ethically, breaking down the walls preventing women from access to capital. On average, women of color make 63 cents to a white man’s dollar in the workplace. How are women and nonbinary people supposed to gain access to capital when they can’t make as much as their male collegues. The primary focus of the program is to provide people immediate funds to help cover the cost of their needs and assist them in establishing financial literacy and credit, while exercising personal autonomy.
Through love, compassion, and partnerships between St. Luke, Scenic Community Credit Union, and various social workers, Loans to Neighbors can provide microloans to people in need.
To receive a loan, people are referred to apply through their social worker. Once the referral application is submitted to St. Luke, a committee reads the application and decides whether they can give the loan, based on available funds and employment records, and clarify the responsibilities of the program. Then the program coordinator, who is a Certified Public Accountant, calls the credit union and tells them to move forward helping the person open an account and receive the loan. Then a research team reaches out to recipients while they are paying back their loan to discuss the effects and challenges that come with loans and living. Once the loan is paid back, the money goes back into the program to secure another loan.
Loans to Neighbors lent their first official loan to a college-educated, single mom, who found herself in a bind under the current national unaffordable housing epidemic. After finding out that her home was about to be sold out from underneath her, she came to the terrible reality that many people seem to be facing, that there was nowhere affordable for her to go. Her social worker expressed that there was a program that might help; they filled out an application for Loans to Neighbors and shortly after had the money and support to move into a new home.
“What kinda threw me off from my goals was my health, I got sick at age 45 and have kinda struggled since then. The change in the economy with rent has really kinda messed alot of people up, who were doing well but rent has doubled… but salary hasn't.”
Gracefully, the recipient has completely paid off her initial loan and continued to allow the credit union to do payroll deduction so that there is money going into her savings to help her be more self-sufficient.
Another recipient found out about Loans to Neighbors through her social worker because her family was facing eviction after she lost her job. Her family consisted of two children and a husband who struggled to find work because he is a disabled veteran.
It's a blessing; Imma say it that way. I wouldn't have had anywhere to go. I wouldn't have had anybody to fall back on... It's helped my children maintain a roof over their head. It let me know that there are resources around in my community that I can count on if I do need help. It made me grateful that there are people and programs out there that still care about other people.
Thanks to Loans to Neighbors and their partners, this family was able to keep a roof over their head as the mom sought a new job.
A local mother of five sought help from Loans to Neighbors when she experienced the unexpected expense of her car motor going out. She applied for a loan through her social worker and was able to get the money to put a new motor in her car so she could continue to get back and forth to work.
St Luke was also able to help a woman consolidate 5 payday loans and 4 credit cards into one loan with 2% over dividend rate of shares versus the predatory rates of up to 460% in Tennessee.
In total, Loans to Neighbors has helped ten people so far, nine women and one man. The program is currently working with a loan pool of approximately $25,000. All of the resources have been given through gracious donations and grants from community members and organizations, including Grand View Foundation, The Faith Foundation, and Community Foundation of Greater Chattanooga.
Loans to Neighbors has been so blessed to build relationships with a local credit union, Scenic Community Credit Union. The loan administrator for this program has donated so much of her time, expertise, and experience. This credit union worker donates her time to not only do the technical parts of the lending process, but also developing relationships with the recipients, counseling them on how to budget and avoid payday lenders. The loan administrator expressed her personal responsibility to council and integrate recipients into membership of the credit union, “We're called members because your membership in the credit union is your ownership… it's a co-op.”
When applicants receive a loan, they open an account at Scenic Community Credit Union to help grow their financial literacy and entrepreneurial opportunities. If they do not have the $25 membership deposit needed to open the account, St. Luke covers the cost. This allows people, who have traditionally been blocked from access to equitable capital advancement, the chance to have ownership in pursuit of a more liberating future. “It doesn't matter what their credit history is, it's a done deal because it's share secured. The money that St. Luke has in their account with us is securing the loans.”
Through this program, some recipients expressed that they have also learned how to advocate for themselves. The loan administrator confirmed this by saying, “If they run into a problem, they call me.” These members have learned that when things come up and they can’t make a payment in one month, it is better to have clear communication about their situation rather than leaving everyone in the dark. This not only allows for some grace in the process, but also makes people more than a name and number on a list of loans. A disabled student who received a loan to help pay for their school expenses said that they feel, “once you start communicating with them and advocating for yourself and telling them this is what I need, can you help me please… they will help you.”
Along with their relationship to Scenic Community Credit Union, St. Luke reached out to the Tennessee Credit Union League, a 501 (c) (6) non-profit trade association for Tennessee credit unions.
“When we were reaching out and presenting to the Credit Union League, they were astounded that we didn’t want their money, just their networking. Through the network of the Credit Union League, we could potentially be providing aid to so many people.”
Going forward, the program has to continue responding to the community's needs. Someone may find themself asking if the program is successful and what does that mean for access to capital? Since the program is so fresh, a hope for equity is in sight, but only time and support can tell it’s success. Today, celebrate that one of the recipients has set up a savings account and is continuing to pay off her loans. Tomorrow, as the church says, “live fully, love unconditionally, and be Christ in the world.”
As for the hard working team consisting of St. Luke, Scenic Community Credit Union, various social worker organizations, and the Credit Union League, thank you for your time and love for your community.
Nate is currently a sophomore at Drew University working on a Bachelors in Women and Gender Studies with a minor in Religion and Political Science. They spent summer 2021 as the ministry intern at St. Luke Chattanooga. Eventually they hope to pursue ...