The Community Loan Center, which provides low-interest, low-fee, small-dollar personal through employers loans as an alternative to predatory payday and auto-title lenders, last month issued its 100,000th loan since the program’s inception in 2011.
The CLC was established by the Community Development Corporation of Brownsville (now Come Dream Come Build) and the Rio Grande MultiBank. CDCB administers CLC RGV as well as the multi-bank, founded by six lenders in 1994 to support affordable housing and small business development. Today the CLC program has grown to a network of 23 local lenders in 11 states.
CDCB Executive Director Nick Mitchell Bennett said the 100,000 loans amount to “serious money” — some $94 million lent and savings to borrowers of more than $77 million in fees and interest.
“About 40,000 of them have been done here in the Rio Grande Valley and another 60,000 at the 19 other (CLC) franchises that we’ve started across the country,” he said.
Mitchell Bennett described the CLC loan program, which uses an online lending model, as a national franchise building relationships with local community lenders. The franchisees use their own lending capital and recruit local employers to participate.
“We created something that has made real impact and has yet to be replicated anywhere in the country,” he said.
CLC, though local employers, offers qualifying employees the opportunity to borrow up to $1,000 at “reasonable interest rates” compared to payday or auto-title loans, according to CLC. Borrowers have a 12-month loan term with no penalties for prepayment. Borrowers pay the loans back through payroll deduction based on their payroll schedules, with payments not to exceed $23 per week for an unsecured personal loan.
Prospective borrowers, meanwhile, can take advantage of free, no-obligation financial education offering tips on topics such as getting out of debt, managing student loans, building a retirement savings plan, becoming a homeowner and getting access to traditional forms of credit.
All franchisees use the same CLC branding, lending software and a package of lending services such as loan processing and documentation, loan funding and loan servicing. Franchisees receive training and technical assistance through Texas Community Capital, which does business as the Community Loan Center of America and serves as coordinator for the CLC franchise network.
Public and private employers that particulate frequently make CLC loans part of their employee benefits packages, while some employers report that the loan program has helped reduce their employee turnover rates, according to CLC RGV spokeswoman Marcela Saenz, who said employee-borrowers tend to like he program because of the ease of obtaining a loan when they need it and the convenience of paying it back automatically through payroll deduction.
The payroll deduction aspect also keeps default rates low, allowing CLC lenders to charge a relatively low interest rate of 18 percent plus a $20 loan origination fee, she said.
Employee/borrowers give the CLC high approval marks because of the ease of getting a loan when they need it and the convenience of automatic loan repayment through payroll deduction, Saenz said. Social investors, meanwhile, support the program because it shows loans to lower income workers “can be reasonably priced,” she said.
Wendy Hanson, Rio Grande MultiBank board members, said the CLC was “created to provide needed and affordable cash assistance to working families in our community” and that the 100,000-loan milestone is a “celebration for not just our community but for the other 19 communities that have a CLC franchise.”