We’re heading into the time of year when payday lenders see the highest volume of business. That’s not a good thing for Floridians. Payday loans are infamous for creating a spiral of debt among people in already difficult financial situations.
BMG Money has an alternative option for people in a pinch — one that has little potential to leave them worse off than before. It is the “LoansAtWork” program.
But to place this program in context, first a few sobering statistics on payday loans.
According to a report just released by the Pew Charitable Trust, only 14 percent of borrowers can afford to repay an average payday loan, leading most to renew or re-borrow at high expense.
Florida is one of 29 states without adequate regulation of payday lending, according to the Center for Responsible Lending.
Florida law limits people to one outstanding loan at a time and requires a 24 hour gap between paying off one loan and borrowing another. Nevertheless, 85 percent of Florida payday loan borrowers take out seven or more loans per year, 63 percent of Florida borrowers take out 12 or more loans per year, and 93 percent take out five or more per year.
In sum, nearly 2.4 million people have used payday loans in Florida. From 2009 to 2011 the number of such loans increased by 11 percent, and the number of storefronts increased by roughly 6 percent.
The average fee on a payday loan in Florida is 275 percent. On average in Florida, 35 percent of biweekly gross income is consumed by a payday loan repayment.
But for someone facing an unexpected expense, what’s the alternative?
About 64 percent of Americans can’t handle a $1,000 emergency. And reasonably-priced bank and credit union loans are only available to people with strong credit.
Miami-based BMG Money’s answer is the LoansAtWork program. These “socially-responsible” loans differ from payday loans in a number of fundamental ways. For one, they are not directed to the general public, but rather are offered to employed people by their employers who sign on as clients with BMG.
In other words, BMG’s loans are approved based on employment status, not credit scores, and have fixed rates, fixed payments, and are paid back over time through small payroll deductions from paychecks.
All together, BMG’s financing costs are one-tenth that of a payday loan.
“With more payday lenders than Starbucks and McDonald’s combined in the state, hardworking Floridians, many with good government jobs, are falling victim to these predatory loans, and their financial well-being is suffering,” Tom McCormick BMG Money’s Chief Operating Officer states. ”LoansAtWork provides an emergency loan program for Floridians who are facing an unexpected expense. We are most proud of our work with mission-driven nonprofit and government clients that make this program available to their staff, at no cost to their own payroll organizations.”
One such client is United Way. Another is Our Kids in Miami-Dade.
“For 2 years, Our Kids Miami-Dade has been offering the LoansAtWork program as a benefit for our employees,” said Fran Allegra, Chief Executive Officer and President of Our Kids. “At Our Kids, we focus on creating a safe, secure, supportive environment for the children and families we work with, as an organization we work to provide the same environment for our employees. It was a no-brainer for us to offer the LoansAtWork program as it fits a niche that isn’t currently offered in the financial industry. We have a responsibility to take care of our staff in the best way possible so they can best assist our community; benefits like the LoansAtWork program help us reach that goal.”