In a couple of weeks, people in Dallas running a little short will have access to small loans that aren't accompanied by usurious interest rates -- provided their employer opts in to a new program from a nonprofit called Business and Community Lenders of Texas.
The Community Loan Center of Dallas will allow employees at participating business to borrow up to half of their gross monthly pay with a $1,000 limit. The loans come with a one-year term and borrowers are charged 18 percent interest. All employers have to do is verify the borrower's employment status and income.
"No one else will [give out small loans]," City Council member Jerry Allen said. "The CLC will do it."
Allen is a longtime opponent of the payday and title loan industry. As it stands, payday and title loans are often the only options available to people facing a short-term crisis. When borrowers can't pay the loan back within the initial term -- usually two weeks or a month -- they are forced to extend the loan. Repeated extension lead to mounting fees and interest, which can add up to many times the original borrowed amount. In Texas, the average $300 payday loan accrues $701 in fees and interest before it is paid off.
"It's just like loan-sharking. You're giving people a right to steal," council member Tennell Atkins said.
Someone who borrowed $300 from the CLC would end paying less than $100 in interest and fees, even if they took the full year to pay off the loan.
Allen pledged to help BCL of Texas and its CEO Rosa Rios Valdez raise money so the program can fund as many loans as possible when it starts.
If you like this story, consider signing up for our email newsletters.
SHOW ME HOW
"We're going to raise the $5 million, the $10 million," he said. "Without question, this is a major economic development for the city of Dallas."
The program will officially launch with a City Hall press conference next week.