Berkshire lender’s scheme to free borrowers from predatory lending gained traction in 2021 | Business
PITTSFIELD — When Federal Credit Union Greylock renovated its Kellogg Street branch to include its first community empowerment center three years ago, it consolidated its financial literacy services into one location.
The branch was chosen because it is located in the Morningside neighborhood of Pittsfield, one of the poorest neighborhoods in the city, where financial education services are most needed.
According to the credit union’s recent impact report, Greylock last year provided $4.5 million in affordable loans, backed by financial coaching and education, to its member-owners to meet the needs of emergency, strengthen members’ credit and help them avoid high rates set by predatory lenders. .
This represents an increase from the $1.8 million in community development loans Greylock provided to members in 2020, when loan volumes were impacted by the pandemic.
“COVID has shut down a lot of things,” said Cindy Shogry-Raimer, Greylock’s vice president of community development. She expects this year’s figure to be more in line with what the credit union has provided in affordable loans in 2021.
“I’m at $1.1 million right now, and we’re only three months away,” she said. “I think we’ll be on the right track with last year.”
Greylock is certified as a Community Development Financial Institution. The US Treasury designation that allows financial institutions to specialize in lending to individuals, organizations, and businesses in under-resourced communities that traditional financial services have not traditionally reached.
Certification enables institutions to provide their clients with financial education, business coaching, and low-interest loans that increase economic potential and help build wealth.
“The need is great,” Shogry-Raimer said. “With low-income people in credit trouble, you have a lot of predatory lenders who are really taking advantage of people.”
Greylock provided 469 so-called “new trucker” loans last year to members who might have turned to domestic subprime lenders, according to the Impact Report.
“When I look at somebody paying 600 or 700 percent interest on one of these fast internet loans, it’s a trap they just can’t escape and it’s crippling,” Shogry- Relove.
Greylock provides assistance to members who find themselves in these situations by getting them out of these unbalanced agreements. The institution buys these other contracts and instead offers loans at lower rates.
The credit union then follows up with progress reports on its member’s financial situation, providing information to all three credit bureaus.
“Not only have they freed up money during the month on a loan that they’ll never repay, but they’re actually paying on time. And, by paying on time, they’re improving their credit score,” Shogry said. -Relove. .
Almost all of Greylock’s affordable loans through the program are based on members’ ability to pay them, not their credit scores.
When Greylock opened its center three years ago, 66% of the credit union’s nearly 90,000 members met federal criteria for low-income customers who lacked adequate access to financial products or services.
Nearly half of potential customers in the region had limited access to emergency cash, Shogry-Raimer said. “When you see this, there is a problem. We have chosen to do something about it.”