The Filene Research Institute and six credit unions have joined forces with the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation to launch a two-year research project to evaluate the long-term impact of an employer-sponsored small dollar loan program.
The program is designed to help employees avoid the high cost of payday lenders, establish or repair credit, and begin to save.
Designed by NorthCountry FCU and United Way of Chittenden County in Burlington, Vt., the loan was pilot-tested by 13 credit unions in eight states with 48 employers as part of the Filene Research Institute Accessible Financial Services Incubator with funding from the Ford Foundation. The two-year pilot confirmed that the loan is feasible, scalable, and meets important needs for employers and low- and moderate-income employees.
“With the work of the FINRA Foundation and these credit unions we will be able to learn what works so that this product can be offered by more financial institutions,” said George Hofheimer, Filene Research Institute chief knowledge officer. “The result is more affordable financial services for millions of Americans.”
Employer-sponsored small-dollar loans are made available to employees of participating companies based on the length of employment but not on credit scores. The application process is simple, and the money is often available on the same day it is requested.
Loans are repaid through payroll deduction, and successful repayment is reported to credit bureaus. After the loan is repaid, a deduction in the amount of the loan repayment continues on an opt-out basis and is deposited into the employee’s savings account.
In addition to North Country FCU, credit unions participating in the ongoing research project include:
Representatives from participating credit unions said the program can have a dramatic effect on loan recipients’ lives
“I have had several people who, with tears in their eyes, hug me and say what a huge blessing this program is for them and how thankful they are to have it available to them,” said Kelly Krumweide, member services officer at Georgia Heritage FCU.