Catholic Charities of Central and Northern Missouri is now helping families recover — financially.
The nonprofit launched a financial wellness program over the summer.
Just last week, his first participating family managed to refinance a payday loan into a manageable payment program.
But the change didn’t happen overnight, according to Kathy Frese, the association’s financial stability specialist.
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 get the program started,” Frese said.
According to the Catholic Charities Financial Wellness webpage, the program aims to help families take control of their daily and monthly finances, gain the ability to absorb financial shocks (or weather emergencies that cause financial hardship), get on track to achieve financial goals, and create financial freedom to make choices that allow them to enjoy their lives.
A Catholic Charities donor helped develop the needed partnership with Mid-America Bank, which could provide loans to eligible customers and repay existing payday loans.
“People entering the program must show they have the ability to repay the loan,” Frese said. “The first family was a referral through the pantry. We started by meeting with them – talking about their finances.”
She had to get some basic information from the client and know what results the client wanted. Frese had to develop a financial image for the family.
“We have to do it based on their goals. Their original goal when they came to me was, ‘We want to be able to save and buy a house.'”
It was going to be tough, Frese said.
Catholic Charities had to help the family pay off their debt. One problem was that the family was facing a high interest loan. The program is intended to help overcome these barriers, she said.
The family met the nonprofit’s requirements before Catholic Charities and Mid-America Bank could refinance their payday loan, which carried an interest rate of 300%.
“When I went last week to pay off the loan, it was clearly posted on the counter – 300% interest,” Frese said. The current prime rate is 7%. “Our program is prime plus 3%. That’s a pretty big amount if you want to get that rate.”
The program limits the loan to $2,700, which must be repaid within 18 months.
But the program does not stop once the client has won the chance to receive the loan.
Frese must guarantee to the bank that the customer can support this loan payment. 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,” she continued.
Sometimes, she says, just taking a few hours to think about a financial decision may be all a person needs to decide they might have alternatives.
“We’re talking about having these debts – what are we doing to start reducing them?” asked Frese. “We’re starting to come up with a plan through monthly coaching. If they write it down every time before they spend money, they might think twice about making that purchase.”
Customers now have access to resources they never knew existed. The Consumer Financial Protection Bureau has a variety of resources and tools that Frese has used to help people.
During the first meetings with clients, she presents them with a questionnaire on financial well-being. It sets benchmarks for the program.
“Six months later, we can see if we’ve made a difference and if we’ve improved,” she said.
Frese said she was struck by the financial lessons parents gave her clients. They basically told customers that when they reached a certain age, they were adults and had to fend for themselves.
“One comment that struck 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 house in order.
“We want to put them in place to be successful,” Frese said. “We don’t want to put them in a position where they struggle.”