Helping Employees Avoid Financial Hardship
As many of us know, balancing work with the rest of life can be a challenging task. This task is only made worse when working people and their families encounter financial uncertainty or even hardship. In recent years, financial stress and dealing with potential incidents, is one of the biggest causes of stress for working adults, with many households reporting that they are unable to deal with an unexpected expense of $500 (CBS Moneywatch).
In recent years, when American families encounter life’s unexpected moments, they have had no choice but to turn to check cashers and payday loan stores. They can get the short term help that they need but the long term consequence is that many of these people get caught in a cycle of predatory lending. Unable to pay their original loan back, they may be offered a deferment if they borrow more money or they are piled on with fees. At the end if they are able to repay that original loan, they face annual percentage rates (APRs) that total 300%. (Pew Charitable Trust)
With increased media coverage and increased scrutiny under the Consumer Financial Protection Bureau (CFPB) the payday loan industry is facing legislation that can limit or even ban their practices across the country. Unfortunately, many states still allow predatory lending tactics to run unchecked. Employee Loan Solutions partnered with Sunrise Banks to take a new approach to combatting predatory lending while still offering working families a way out of unexpected debt.
The key to their solution is in collaborating with employers to offer their employees a short-term, small dollar loan alternative, called TrueConnect. This loan program is offered to employees as a voluntary benefit at no cost to the employer and Sunrise Banks N.A. services the loans. The amounts that employees can borrow through TrueConnect are limited to help prevent employees borrowing more than they can afford to pay-off. The loan payments are then deducted straight from their payroll over the course of the next year.
Rather than wait for states or the federal government to further regulate payday lenders, Employee Loan Solutions and Sunrise Banks have set out to give working families an alternative in times of financial stress to reduce the dependence on payday lending. Working with employers this way allows companies to take part in their employees’ financial well-being and reduce the stress on their workforce.