Pilot Program in Baltimore Provides Small, Low-interest Loans to Low-income Residents to Help Them Avoid Predatory Lenders

Lawyers who work with low-income clients well know how consumer debt problems can plague the communities they serve.  Individuals and families who fall on hard times and need bridge money to cover the rent or pay utilities often end up using the services of “payday” and other high-interest lenders, and many of the borrowers end up digging themselves deeper into debt rather than avoiding it. 

The Washington Post profiles an FDIC staffer, Joan Lok, who is shepherding an… 

innovative pilot program [in Baltimore] that provides small dollar, low interest loans to those in need through a coalition of financial institutions, local community-based organization and other partners.Lok said the goal of the Borrow and Save Loan Program is to help low and moderate-income borrowers break the perpetual payday borrowing cycle, establish healthy banking relationships, gain personal money management skills, and learn the benefits of saving and asset building.

“We are trying to fill a void,” Lok said. “Our program not only helps solve emergency loan needs of individuals, but can cause people to look at their personal finances and change their behavior.”

The Baltimore-based pilot program provides loans between $300 and $1,000 with a repayment term of up to one year at an interest rate of 7.99 percent, compared to cash advance brokers that charge interest rates of 30 percent or more for two week loans.

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