Breaking the Stranglehold of Predatory Lenders

Breaking the Stranglehold of Predatory Lenders

Community Works Carolina Breaks the Stranglehold of Predatory Lenders

CDFI helps South Carolina consumers build financial health and stability

Wanda Wilson got caught in a debt trap of high-cost, predatory loans after her old car broke down. When it needed repairs, she was on a tight budget, had a low credit score, and didn’t qualify for a bank loan to finance the fixes. So the Greenville, SC, resident used the car’s title as collateral for a 95 percent interest loan through a local lender. Some time later, the car needed additional work, and Wanda took out a second loan—at 54 percent interest—with another finance company. Her monthly payments skyrocketed.

Enter CommunityWorks Carolina (CW), a trailblazing CDFI with the mission to build brighter futures for underserved families and communities through financial education, lending, and investing. The nonprofit, which recently launched CommunityWorks Federal Credit Union (CWFCU) to provide an alternative in the underbanked South Carolina communities it serves, helped Wanda escape the strangling loan payments. It paid off, assumed—at a 13.89 percent interest rate—and consolidated her two loans. As a result, Wanda’s monthly payments lowered from $179.00 to $82. This year, in total, she’ll save $2,096 in monthly payments and interest.

Financial success stories like Wanda’s are what drive CW. The CDFI works in one of the three worst states for upward mobility. With limited access to affordable financial products, only 26 percent of South Carolina households are able to improve their financial situation in their lifetimes. And, because more than half of the state’s residents don’t have savings and 64 percent have subprime credit, low-wealth families often turn to predatory lenders to meet financial needs—in fact, nearly one-in-four residents have used a predatory lender with interest rates around 400 percent. And because there are five times as many high cost lenders as mainstream banks in South Carolina, these lenders are easy to find.

To fill this large gap in responsible, affordable consumer products and services, CW and CWFCU offer diverse savings accounts that support different goals, loans for multiple purposes, and financial education resources and counseling. In 2015, the CDFI was a finalist for the NEXT Awards for Opportunity Finance Seed Capital grant for SavvyMoney, an online tool that helps consumers take control of their finances. Offered by the credit union at no cost to its members, SavvyMoney provides free monthly credit scores, credit-building help, budgeting tools, and low-cost refinancing and debt options.

“CommunityWorks has always been courageous and cutting edge—our goal is to be part of the solution,” explains Deborah McKetty, CEO. “Today, we face so many challenges in consumer finance. The national headquarters of two of the nation’s largest finance companies are in South Carolina, and there are at least 23 predatory lenders within a half-mile radius of our offices. To offset this lending landscape, CommunityWorks is determined to be a safe finance alternative and to guide people on the pathway to financial stability.”