MOORHEAD-City and state officials gathered here Monday, June 4, to discuss ways to help Moorhead residents avoid what one nonprofit organization calls the "debt trap" of payday loans.
Exodus Lending, which helped organize Monday's meeting, says many residents in the region who take out payday loans face fees and interest rates upwards of 200 percent after they become stuck in a cycle of debt marked by constant renewal of loans and the paying of interest and fees on an ongoing basis.
According to the organization, in 2016 at least 1,156 borrowers in Clay County paid about $303,000 in interest to payday lenders, money Exodus Lending said could go to groceries, children's medications and college savings accounts.
Based in the Twin Cities, Exodus Lending offers help to borrowers by refinancing existing payday loans while charging no interest and no fees, said Sara Nelson-Pallmeyer, executive director of the nonprofit.
Nelson-Pallmeyer and others attending Monday's workshop said people often resort to payday loans in the face of an immediate financial crisis without weighing the ultimate costs involved.
Nelson-Pallmeyer advised that before anyone takes out a payday loan that other options be strongly considered, including borrowing from friends or relatives, taking on more hours at work, and cutting down on spending.
"Because that's what they're going to have to do eventually to get out of the cycle; they might as well do it before they get into the cycle, if they can," Nelson-Pallmeyer said.
"Even putting money on a credit card isn't as bad as payday loans," added Nelson-Pallmeyer, whose organization helps people in Minnesota by taking over payday loans and getting paid back by the individuals they help.
She said the organization that was formed in 2015 has helped dozens of people, with a successful payback rate of about 95 percent.
Of those who aren't paying the organization back, some have filed for bankruptcy, which Nelson-Pallmeyer said is something of a victory for the consumer.
One attendee of the workshop was Dean Grier, pastor of First Lutheran Church in Audubon, Minn.
The church has taken the lead in putting together a program that offers small, no-interest loans up to $1,000 to people who live in the Audubon zip code, or have children in the Audubon-Lake Park School District.
The program fired up the curiosity of many at Monday's meeting, including Pastor Sue Koesterman, executive director of Churches United for the Homeless, a homeless shelter where the meeting was held.
Koesterman said sometimes one financial crisis leads to another and then another, causing a cascade of hardship individuals may have difficulty escaping from.
"They lose the ability to future think," Koesterman said.
Grier agreed and provided an example where church officials recently struggled with whether to make a loan to a woman who is striving to become a nurse.
He said the woman's request didn't quite meet the criteria set out for making loans, but she was granted one anyway.
"I could see her breathing again," Grier said. "She was able to think about the future again."
Community Financial Services Association of America, an industry group representing many payday lenders in the United States, is aware of the industry's image and it posts information on its website pointing out the need for payday lending companies.
The information includes a 2017 Federal Reserve report that found that 40 percent of Americans would struggle to cover an unexpected expense of $400.
The report also stated that more than one-fifth of adults are unable to pay their monthly bills in full.
"The Federal Reserve's report proves what we have long known: millions of hard working Americans live paycheck-to-paycheck and struggle to bridge financial gaps or pay for unexpected expenses," said Dennis Shaul, the association's CEO.
Aiming at what he said were misguided attempts to regulate the industry, Shaul said demand for small-dollar credit will continue to exist even if payday-type loans are no longer available.
"Removing consumers' access to small-dollar loans provided through legal, licensed lenders will only exacerbate the financial struggles that millions of Americans face and will force them to turn to unregulated, illegal lenders operating in the shadows," Shaul said.
According to the association, about 12 million households use small-dollar loans each year.
Grier said the local church lending program, called Neighbors Lending, aims to provide a cheaper alternative by building a pool of funds that comes from donations from members of First Lutheran's congregation and a handful of other area churches.
Congregation members can get their money back once loans are repaid, but Grier said many donors appear fine with the idea of letting their money continue to circulate in the community indefinitely.
Grier said given Exodus Lending's experience, they're hoping repayment rates will be high.
"We tell them, 'Every repayment you make is helping the next person down the road,''' Grier said.
For more information about Exodus Lending, call (612) 615-0067 or visit www.exoduslending.org.