Shannon came to Catholic Charities of Northern Kansas because she heard about the predatory debt relief program via word of mouth.
Her loan ballooned from the original $900 title loan to nearly $1,300 from the interest and service charges.
It was April 2015 when Shannon first sat in the office of Claudette Humphrey, Director of Stabilization Services at Catholic Charities. Humphrey oversees the KLPP, which helps those like Shannon who are trapped in a cycle of payday lending.
“Most people who go to a predatory lender go to pay a necessity such as rent, mortgage, a car payment or to repair a vehicle so they can continue to work,” Humphrey said.
She said payday or title loans are marketed as a one time ‘quick fix’ for people facing a cash crunch. When the client cannot pay the loan back, they ‘re-loan’ with an additional service fee. Payday loans are balloon notes, with up to 391 percent APR. Title loans are secured with the vehicle’s title, with an average interest rate of 260 percent.
Once a client completes the appropriate paperwork and is approved to participate in the Kansas Loan Pool Project, the client begins monthly coaching with KLPP staff. Each office of Catholic Charities: Hays, Salina and Manhattan, has staff to assist with predatory debt relief. The first order of business is a budget.
“For people who live paycheck to paycheck, budgeting isn’t something they’ve used previously,” Humphrey said. “They often pay the bills they can. We look at a budget to see where exactly the money is going.”
Shannon said grasping her budget was difficult in the beginning.
“When we started, I couldn’t even go out to eat with a friend, my money was so messed up,” Shannon said.
“If she went out to eat, she’d have extreme guilt,” Humphrey added. “She knew she used the money she alloted for the water bill, and now there was no way to pay the utility bill.”
Shannon filled out paperwork, including a budget, as Humphrey assisted her in paying off her original loan. The monthly payment went from $200 per month, which covered only the interest, to $88 per month. The loan was paid off in 18 months.
The process hasn’t always been easy. Figuring out her household budget took some time.
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“I would come in and could only account for some of my money,” Shannon said. “(The budget) made me more aware of how much I spent on pop at the quick shop.”
With guidance from Humphrey, Shannon said she learned how to adapt her spending habits.
“She asked if I could buy a 12-pack (of pop) and keep it at my house,” Shannon said. “Before, when I would go grocery shopping, I would try to stock up for the month. Now I go once a week, and I spend less overall on groceries.”
She’s also learned to decipher between a need and a want, especially in a social situation when friends are spending money.
“I’ve learned I can go out and enjoy myself and have a glass of water, not have to have a few beers,” Shannon said.
During their monthly meeting, Shannon and Humphrey review the budget, update her employment status, and also review future goals.