Alternatives to Payday Loans: Employer-Based Small Dollar ... · Alternatives to Payday Loans:...
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10/18/2016 1 Alternatives to Payday Loans: Employer-Based Small Dollar Loans Ginger McNally, OFN; Tanya Ladha, CFSI; Jeff Smith, NorthCountry FCU; Nick Mitchell-Bennett, Rio Grande Valley Multibank Corp; David Reiling, Sunrise Banks #OFNCONF #RETHINK Alternatives to Payday Loans: Employer-Based Small Dollar Loans Welcome Session Highlights – EBSDL Knowledge Network – Employer Business Case – Successful Models of Partnership and Collaboration – Roundtable discussion
Transcript of Alternatives to Payday Loans: Employer-Based Small Dollar ... · Alternatives to Payday Loans:...
10/18/2016
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Alternatives to Payday Loans: Employer-Based Small Dollar Loans
Ginger McNally, OFN; Tanya Ladha, CFSI; Jeff Smith, NorthCountry FCU; Nick Mitchell-Bennett, Rio Grande Valley Multibank Corp; David Reiling, Sunrise Banks
#OFNCONF #RETHINK
Alternatives to Payday Loans: Employer-Based Small Dollar Loans
Welcome Session Highlights
– EBSDL Knowledge Network– Employer Business Case – Successful Models of Partnership and Collaboration– Roundtable discussion
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Employer-Based Small Dollar Loans Knowledge Network
Knowledge Network– Prudential support for responsible consumer finance– Nine CDFIs offering products + 2 partner experts– Commitment to expansion, partnership, replication
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Employer-Based Small Dollar Loans Knowledge Network Participating CDFIs
• Brazos Valley CDC• Citizen Potawatomi CDC• North Country Federal Credit Union• Nusenda Federal Credit Union• Rio Grande Multibank Corporation• Southern Bancorp• Spring Bank• Sunrise Banks• Veridian Credit Union
Partner Experts• Center for Financial Services Innovation (CFSI)• National Federation of Community Development Credit
Unions
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Presenters
Ginger McNallySenior Vice President, Strategic ConsultingOpportunity Finance Network (OFN)[email protected]
Tanya LadhaManager, Advisory Services and Nonprofit InvestmentsCenter for Financial Services Innovation (CFSI)[email protected]
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Presenters
Jeff SmithDirector of Credit AdministrationNorthCountry Federal Credit [email protected]
Nick Mitchell-BennettExecutive Director, Community Development Corporation of
BrownsvilleAdministrator, Rio Grande Valley Multibank [email protected]
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Presenters
Jeff SmithDirector of Credit AdministrationNorthCountry Federal Credit [email protected]
Nick Mitchell-BennettExecutive Director, Community Development Corporation of
BrownsvilleAdministrator, Rio Grande Valley Multibank [email protected]
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Presenters
David ReilingPresidentSunrise [email protected]
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Tanya LadhaManager, Advisory Services and Nonprofit Investments
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Financial Health
Financial health comes about when your daily systems help you build resilience and pursue opportunities.
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Resilience Opportunity Day-to-day
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Financial Health In America
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Source: Understanding and Improving Consumer Financial Health in America, CFSI, 2015
68 million people are un/der banked
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Loan Uses
“A Complex Portrait: An Examination of Small-Dollar Credit Consumers,” CFSI, 2012
Top 3 Uses of Loan Funds:
Rent (18%)
Utility bills(36%)
General living expenses (34%)
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Financial Health Challenges
Consumer Financial Health Study, CFSI, 2015
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92% of SDC users are struggling financially
66% of SDC users have less than $1,000 in liquid assets
75% of SDC users juggle bills
49% of SDC users do not save
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30% of American households say they could only make ends meet for three months or less if they were to experience a sudden drop in income.
27% of Americans report having less than $1,000 saved for retirement.
43% of Americans describe themselves as struggling to pay bills and credit payments.
15Source: Understanding and Improving Consumer Financial Health in America, CFSI, 2015
Consumer Challenges
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Source: Understanding and Improving Consumer Financial Health in America, CFSI, 2015
Worry all the time about being able to meet monthly living expenses25%
30%
45%
Highly satisfied with present financial condition
Confident I can meet long-term goals for financial security
Consumer Attitudes
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Reduced Employee Productivity
At least 25% of employees, regardless of their position or salary, are financially stressed and are costing businesses huge losses every year in the following ways:
Financially stressed employees spend 20 hours per month distracted by personal financial issues.
Health and Welfare Issues75-90% of all doctor visits are stress related and these problems are increasing employer costs.
Employee Turnover40% of employee turnover is due to stress and some change jobs just to earn more short-term income .
HR Department DistractionsFinancially stressed employees cause productivity issued to both themselves and others.
Source: HR Challenge: How to Improve Productivity and Reduce Healthcare Expenditure Through Workplace Personal Finance Education (2004); http://www.salmonthrust.com/RR026.pdf
Financial stress and is disruptive and costly.
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$5,000 per employee, per year
A 2010 Federal Reserve Study often cited by the National Financial Educators Council as well as other organizations place a spotlight on the problem financial stress causes in the workplace.
Employee financial stress causes a significant drop in productivity, costing employers $5,000 per year.
1.5x – 2.5x employee salaryThe expense of replacing employees lost due to negative impacts of stress.
$1,200 in training costsIndependent of the cost of turnover, there are hard costs associated with training a new employee.
Sources: The Toll of Financial Stress in the Workplace (2013); http://www.kiplinger.com/article/business/T020-C000-S001-the-toll-of-financial-stress-in-the-workplace.html; Wells Fargo Middle-class Retirement Study (2014); Asset Funders Network: The Power of Credit Building (2014); Federal Reserve: Report on the Economic Well-Being of U.S. Households in 2013.
Financial stress and is disruptive and costly.
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Questions?
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Jeff SmithDirector of Credit Administration
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Employer-Sponsored Income Advance Loan
What is it?
Why was it created?
How it works?
Memorandum of Understanding
Who it benefits?
Identifying the best partners
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Employer-Sponsored Income Advance Loan
What is it?– Employee benefit
– Immediate access to small emergency loans
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Employer-Sponsored Income Advance Loan
Why was it created?– Payday loan alternative
– Credit union philosophy
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Employer-Sponsored Income Advance Loan
How does it work?– Nominal annual fee paid by the employer
– Managed through the employer’s HR department
– Fast emergency cash (no underwriting)
– Automatic approval
– Loan repaid through payroll withdrawal
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Employer-Sponsored Income Advance Loan
Memorandum of Understanding– Required length of employment
– Loan maximums
– Term maximums
– Primary contacts
– Setup costs
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Employer-Sponsored Income Advance Loan
Who benefits?– Employees: Receive access to affordable credit for
emergency purposes
– Employers: Offering a meaningful and rare
employee benefit
– Financial Institutions: Build relationships and
community
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Employer-Sponsored Income Advance Loan
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Employer-Sponsored Income Advance Loan
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Employer-Sponsored Income Advance Loan
What makes a good partnership?– Dedicated staff on both sides
– Committed leadership
– Program and product that is simple and easy to
use
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Questions?
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Nick Mitchell-BennettExecutive Director
Administrator
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Who is the Rio Grande Valley Multibank?
RGVMB is a for-profit stockholder held CDFI started in 1994
The CLC started in 2011 as a wholly owned subsidiary of the RGVMB
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Who is the Rio Grande Valley Multibank?
Three loan products– Mortgage Loans– Interim Const. Loans– Small dollar consumer
loans
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CLC Loan Product
$1,000 Loan Maximum– Or up to half of borrower’s monthly gross pay – One Year Loan term
18% Interest (21.83% APR) $20 origination fee Relaxed underwriting No collateral No Prepayment Penalties Lenders Report to Credit Bureaus Repayments $23.38/week or $94/month
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Online Loan Origination System
Proprietary Online Software (KENN System)
– Online Application (open 24 hours)– Employer Portal (verify
employment, payment)– Local Lender Administrative Portal– Administrative Portal
• loan servicing, fund transfer, payments
Jobs and Processes Automated for Efficiency
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CLC Network Relationships
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Nationwide Expansion
To date, we have CLC partners in the following areas:
– Rio Grande Valley– Laredo– Houston– Austin– Dallas– Waco– Brazos Valley Council of
Governments area– Northeast Indiana– West Central Indiana– Baltimore, Maryland
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CLC Cumulative Production By Quarter
Total - $14,583
0
2000
4000
6000
8000
10000
12000
14000
16000
QTR 42011
QTR 12012
QTR 22012
QTR 32012
QTR 42012
QTR 12013
QTR 22013
QTR 32013
QTR 42013
QTR 12014
QTR 22014
QTR 32014
QTR 42014
QTR 12015
QTR 22015
QTR 32015
QTR 42015
QTR 12016
QTR 22016
QTR 32016
RGV DAL BV TX NEIN
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What Have We Learned?
Bifurcated Business Model– Loan Servicing & Funding– Sales & Lending
Keep a Balanced Employer Portfolio– Stable employers to less stable
employers– “Underwriting” the employer
Proprietary Software System a Must
– It does what ever we want Keep Growing & Adding Employers
– This is a volume business – Keep up relationships with
employers
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Questions?
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David ReilingPresident
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Placed-Based Products
Deposit Accounts, including the Socially Responsible Deposit Fund (SRDF) Consumer Lending Commercial and Industrial Loans Small Business Administration Loans New Markets Tax Credit Loans Cash Management
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People-Based Products
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Mission
Innovation
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EmpowerAchievement
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www.employeesolutions.com
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Lessons LearnedLessons Learned
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www.safeloancoalition.com
David Rothstein: [email protected]
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Questions?
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Round Table Discussion
Question One: What do you think is the biggest challenge to scaling a product like this?
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Round Table Discussion
Question Two: Who has been your most important partner to the success of your employer-based small dollar lending? How did you find and work with that partner?
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Questions?
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Contact Information
Nick MitchellRio Grande Multibank [email protected]
David ReilingSunrise [email protected]
Ginger McNallyOpportunity Finance [email protected]
Tanya LadhaCenter for Financial Services Innovation [email protected]
Jeff SmithNorthCountry [email protected]
