Catholic Charities of Central and Northern Missouri is now helping families get back on their feet financially.
The nonprofit organization started a financial wellness program over the summer.
Last week, your first participating family was able to refinance a payday loan into a manageable payment schedule.
But the change didn’t happen overnight, according to Kathy Frese, a financial stability specialist at the nonprofit.
Modeled after a similar program at Catholic Charities of Northeast Kansas, the wellness program aims to break a circular cycle of predatory lending.
“(Catholic Charities of Northeast Kansas has) a great resource for me to start the program,” Frese said.
According to the Catholic Charities Financial Wellness webpage, the program is intended to help families gain control over their daily and monthly finances, gain the ability to absorb financial shocks (or overcome emergencies that cause financial stress) . ), get on track to achieve financial goals, and create financial freedom to make decisions that allow them to enjoy their lives.
A Catholic Charities donor helped develop the necessary partnership with Mid-America Bank, which could make loans to qualifying clients and repay existing payday loans.
“People who get into the program have to show they have the ability to repay the loan,” Frese said. “The first family was a referral through the food pantry. We started by meeting with them, talking about their finances.”
I had to get background information on the client and know what results the client wanted. Frese had to develop a financial picture for the family.
“We have to do it based on what their goals are. Their initial goal when they came to me was, ‘We want to be able to save up and buy a house.'”
It was going to be a challenge, Frese said.
Catholic Charities had to help the family eliminate their debt. One problem was that the family was facing a high-interest loan. The program is meant to help overcome those obstacles, she said.
The family met the nonprofit’s requirements before Catholic Charities and Mid-America Bank were able to refinance their payday loan, which carried an interest rate of 300 percent.
“When I went last week to pay off the loan, it was clearly posted on the counter: 300 percent interest,” Frese said. The current prime rate is 7 percent. “Our program is prime plus 3 percent. That’s a pretty significant amount if you’re going to get that rate.”
The program limits the loan to $2,700, which must be paid back within 18 months.
But the program does not stop once the client has earned the opportunity to receive the loan.
Frese must assure the bank that the client can support the payment of that loan. Clients participate in monthly case management with her during the loan program.
“I give them tools to track their spending. We give them advice based on what they value,” he continued.
Sometimes, he said, simply taking a few hours to think about a financial decision may be all a person needs to decide they might have alternatives.
“We talk about having these debts, what do we do to start reducing them?” Strawberry asked. “We started coming up with a plan through the monthly training. If they write it down every time before they spend the money, they might think twice about making that purchase.”
Customers now have access to resources they didn’t know were available. The Consumer Financial Protection Bureau has a variety of resources and tools that Frese has used to help people.
During initial meetings with clients, he guides them through a financial wellness questionnaire. Set benchmarks for the program.
“Six months later we can see if we have made a difference and improved,” he said.
Frese said he was surprised by the financial lessons the parents gave their clients. Essentially, they told customers that when they reached a certain age, they would be adults and would have to figure out the finances for themselves.
“One comment that stood out to me was that they said, ‘My parents didn’t teach me any of these things,'” Frese said.
She said a “sink or swim” approach doesn’t work for people trying to get their financial situation in order.
“We want to set them up for success,” Frese said. “We don’t want to put them in a position where they have problems.”