At the recommendation of a member of the Board of Trustees of the congregation I serve, last summer I began attending meetings and actions sponsored by the KC metro area community organizing outfit known as CCO: Communities Creating Opportunity. This past week I attended two interesting events.
On Monday, March 29, I joined a coalition of ministers and lay people from Wyandotte County who met with KCK Mayor Joe Reardon for a research action. We were also joined by top level members of Reardon's staff. Most of the issues we brought before him had to do with the foreclosure crisis. What could the Mayor do to make homes going through foreclosure less conspicuous? If you plaster bright colored stickers on the doors of those homes, it is an open invitation for squatters and vandals to occupy the homes. Rates of crime go up. The property becomes an eyesore and more stickers are added. The yard turns into a trash heap. In our research action we pressed for answers about what was going to happen to the foreclosed homes that the Unified Government of Wyandotte County has been purchasing, about the development plans for a specific neighborhood, and about what the County was doing to improve public health. A recent study showed that Wyandotte County ranked dead last among Kansas counties in terms of health outcomes.
We filled Mayor Reardon's conference room to the point of standing room only. As a Jackson County resident who serves a church in Johnson County, my presence was not as strange as it might seem. (Our congregation has several families who either live or work in Wyandotte.) It also sent a message that people outside of KCK were paying attention and concerned about what happens there.
On Wednesday, March 31 I attended a breakfast meeting held at the Kauffman Foundation. This meeting was a gathering of clergy from throughout the metropolitan area along with Presidents and other high-ranking executives of local banks. We had come together in order to work on a community-based program to provide an alternative to forms of predatory lending, such as Payday loans.
I was astounded to discover that the solution that we were working on was essentially the equivalent of microlending. In case you are wondering, microlending is a tool used in developing countries to capitalize very small time businesses and help people out get out of poverty. Many of those loans are for an amount like $10: "Here is $10 from the community lending pool for you to buy some wool so you can knit some scarves. A week later you will pay us back after you sell the scarves." You may be familiar with this model through organizations like the Grameen Foundation or FINCA.
Essentially, this group is working on a model that would allow people to take out a small, short-term, loan of $100 to $500 at 36% APR rather than an APR of 10 to 20 times that amount at a Payday loan store. The 36% level was decided upon because of a Federal law passed in 2007 capped the loan interest rate for active-duty military and their families at 36%. This law came as the result of payday lenders targeting military personnel and concentrating payday loan stores around military bases.
In some ways this meeting was uplifting. In other ways it was depressing. 36% is still a very high interest rate to charge. And, the programs would not be for everyone. It would be limited to people who are employed and who have bank accounts. As one banker put it, paraphrasing the words of Jesus, "Payday loans will always be with us." And, payday loans are more than just an inner city problem. You don't just find these businesses in Midtown KCMO or up in KCK. Each morning I commute to work driving South on Metcalf in Overland Park. When I moved to town in 2003, there was not more than one or two payday loan stores between the 7400 and 8300blocks on Metcalf. I counted six when I drove this stretch a few days ago.
A Moment of Levity
With all this sobering news about the problems in our community, I could not end without offering a moment of levity. A local businessman who helped to convene the meeting began with the following story.
Earlier in his career this man was in New York City when he learned that he had to leave immediately to conduct business in Europe for two weeks. He went to a bank and asked to take out a loan for a couple thousand dollars. The banker told him that they didn't make loans for less than $5,000. The businessman agreed to borrow that amount. When told that he needed to provide collateral, the man handed over his car keys. Two weeks later the man returned from Europe. He paid off his loan in full with a check for $5,023.19. The loan officer asked him if he wouldn't mind waiting for a minute or two. All the bankers wanted to meet the man who had put up an $80,000 Mercedes as collateral on a $5,000 loan. One of the bankers looked at him and shook his head. "I don't get it. We did some checking and found out that you have a very large net worth. Why did you take out a loan? The businessman replied, "It is an easy answer. Where else can you park your car for two weeks in New York City for only $23.19?"