Catholic charities in central and northern Missouri are now helping families get well — financially.
The nonprofit organization launched a financial wellness program in the summer.
Just last week, the first participating family managed to refinance a payday loan into a manageable payment program.
But the change didn’t happen overnight, according to Kathy Frese, the nonprofit’s financial stability specialist.
The wellness program, modeled after a similar program run by Catholic charities in Northeast Kansas, aims to break a cycle of predatory lending.
“(Catholic Charities of Northeast Kansas has) been a great resource for me to get the program started,” Frese said.
According to the Catholic charity’s Financial Wellbeing website, the program aims to help families take control of their daily and monthly finances, cushion financial shocks (or overcome emergencies that cause financial stress), get on track, to achieve financial goals and give yourself the financial freedom to make decisions that allow you to enjoy your life.
A donor to the Catholic charity helped establish the necessary partnership with Mid-America Bank, which was able to provide credit to eligible customers and repay existing payday loans.
“People who participate in the program have to show that they are able to repay the loan,” Frese said. “The first family was a pantry recommendation. We started by meeting with them — and talking about their finances.”
She needed to get background information from the client and what the client wanted to achieve. Frese had to develop a financial picture for the family.
“We have to do it based on their goals. When they came to me, their initial goal was, ‘We want to save and buy a house.'”
It would be a challenge, Frese said.
Catholic charities had to help the family pay off their debts. One problem was that the family was faced with a high-interest loan. The program is designed to help overcome those hurdles, she said.
The family met the nonprofit’s requirements before Catholic Charities and Mid-America Bank were able to refinance their payday loan, which paid 300 percent interest.
“When I went to pay off the loan last week, it was clearly visible on the counter – 300 percent interest,” Frese said. The current key interest rate is 7 percent. “Our program is Prime plus 3 percent. That’s quite a significant amount if you want to get that rate.”
The program caps the loan at $2,700, which must be repaid within 18 months.
But the program doesn’t stop once the customer gets the chance to get the loan.
Frese must assure the bank that the customer can support this loan payment. Clients participate with her in monthly case management throughout the loan program.
“I give them tools to track their spending. We advise them based on what’s important to them,” she continued.
Sometimes, she said, it can take just a few hours for a person to think about a financial decision to decide if they have alternatives.
“We’re talking about having this debt – what are we doing to start paying it off?” asked Frese. “We start with monthly coaching to develop a plan. If they write it down every time before they spend the money, they might think twice about making that purchase.”
Customers now have access to resources they didn’t know were available. The Consumer Financial Protection Bureau has a variety of resources and tools that Frese has used to help people.
During initial meetings with clients, she guides them through a financial wellbeing questionnaire. It sets standards for the program.
“Six months later we can see if we’ve made a difference and improved,” she said.
Frese said she was impressed by the financial lessons parents gave their clients. They were essentially telling clients that by the time they reached a certain age, they would be adults and should figure out their finances on their own.
“One comment that struck me was when they said, ‘My parents didn’t teach me any of these things,'” Frese said.
She said a “sink or swim” approach doesn’t work for people trying to get their finances in order.
“We want to put them on the road to success,” said Frese. “We don’t want to put them in a position where they fight.”