The number of Americans aged 62 and older using payday lending has tripled in the past five years with annual percentage rates as high as 372%.
In response to this staggering figure and the desperation resulting from COVID-19 in 2020, HUD-approved housing and financial counseling agency, Empowering and Strengthening Ohio’s People (ESOP) launched a 0% interest, no-fee Senior Small Dollar Loan for people aged 55+.
Backed by funds from bank partners, the loan ranges up to $1,000 and is designed to help older adults weather COVID-19 financial hardships without getting trapped in the vicious cycle of payday loans. ESOP’s zero-interest loan can be used for rent, mortgage payments, property taxes, insurance, home repairs, utilities, transportation, medication, and other basic needs.
To break the payday lending cycle, borrowers also receive financial capability (knowledge, skills and access to resources) including one-on-one financial counseling for help in decreasing expenses, increasing income, budgeting, benefits enrollment, matched savings, free income tax preparation, behavioral health services, and more.
But a troubling red flag is that today 67% of the applicants get declined because they can’t afford to pay back the loan principal at a maximum $20.83 a month over four years. The fact that prospective older adult clients don’t have enough income to pay on a $1000 zero-interest loan over 48 months is an indicator in and of itself of the challenges our low-to-moderate income seniors face.
This session will tell you how ESOP approached bank partners for help launching this loan, what is working with the program, and what changes we are making to serve more older adults in 2021 based on the lessons learned so far.
ESOP will share our findings as we endeavor to answer the question: How can we provide older adults with immediate financial relief and also improve their long-term financial capability?
This session is part of NCRC’s Age-Friendly Banking Convening and is brought to you in partnership with JP Morgan Chase.