A new community credit union began operating today in Lincoln, Nebraska, seeking to alleviate the poverty situation of thousands of residents in the state capital through financial education and group services projects usually without access to traditional financial institutions.
According to information released by the National Credit Union Administration (NCUA), the HOPE Community Cooperative (Esperanza) already meets the federal requirements to grant low-interest loans to low-income people, thus preventing those people from applying for short-term loans Time and with high interests.
“A typical payday loan user with annual income of $ 35,000 does not have enough income to pay his loans and cover his other monthly expenses. As a result, those users get stuck in the debt-lending trap until Payday for several months each time, “explained Mark Koller, general manager of the HOPE Cooperative.
In Nebraska, the laws do not allow anyone who can not afford a short-term loan (with an average of $ 500) to take out another loan at the same location, but they also do not prevent borrowers from getting loans from other sites simultaneously.
In addition, because of the small amounts, lenders are not required to verify whether or not borrowers can repay the loan, accentuating the financial problems of those who access those services.
In fact, according to the Center for American Progress’s statistics for 2016, 6.9 percent of Nebraska families use “high-risk, high-risk forms of credit to pay their bills,” with an annual interest rate of Up to 461% above primary interest, compared to a maximum annual interest rate of 36% in neighboring Colorado.
At the same time, according to census projections, more than one in four Nebraska families live in poverty, thus being vulnerable to short-term loans.
In February of this year, nonprofit Nebraska Appleseed, also headquartered in Lincoln, released a report prepared by its director James Goddard highlighting the need for new state laws to protect consumers and restore “access to credit in Equitable and reasonable terms “.
For the HOPE Cooperative, this goal will be achieved through a financial education program that allows participants (whether or not members of that cooperative) to “achieve financial independence and build wealth” by accessing “alternative financial services already under Cost “while receiving technical assistance on the use of these services.