SOUTH BEND, Ind. (AP) โ Desperate for money to keep the lights on and provide her daughter with a few gifts last Christmas, Patricia Patterson turned to short-term lending.
She had been there before. Patterson, 42, a South Bend native, took out a payday loan to make ends meet a few years ago when she lived in Nashville, Tenn., she said. That didn't end well for her.
"It hurt my credit when they sent it to collections," Patterson said, still upset from the experience of falling behind on payments to a payday lender.
Her second time around with a short-term loan was much different. Patterson took out the loan last December in South Bend from a lender she calls the "JIFFI boys."
"The JIFFI boys didn't do anything like that," she said, mentioning the low interest rates and lack of "harassing phone calls" that marked her first experience.
JIFFI is the Jubilee Initiative for Financial Inclusion, a nonprofit started in 2013 by Notre Dame finance student Peter Woo as a way to combat what he saw as predatory lending in South Bend.
The JIFFI boys Patterson talks of are Jack Markwalter, JIFFI CEO, and company. All of JIFFI's employees, some of whom are women, are students at the University of Notre Dame or Saint Mary's College. Patterson happened to have worked only with men from the organization, hence, "JIFFI boys."
"I didn't know we had that nickname," Markwalter said. "That really speaks to the personal relationship we have with our clients that differentiates us from traditional payday lenders."
JIFFI offers an alternative to services such as the one Patterson dealt with in Nashville. That's the biggest component of its mission, "to create a financially inclusive environment in the South Bend community," Markwalter said.
What that looks like currently is offering short-term loans with low interest and flexible payments, and financial literacy education. Now in its third year, Markwalter said he wants to see JIFFI expand to take on new clients and bring in more money to lend.
The money JIFFI lends comes largely from donations and grants, but JIFFI, a nonprofit, still charges interest on loans it makes. The company sets the interest rate far below those of payday lenders, Markwalter said, and considers it an opportunity for borrowers to learn about how interest works so that when clients need to take out a loan from a bank, they will be familiar with the terms.
"We don't think it makes a huge dent in what they end up paying us when they pay the loan back. The average is about $9 interest," Markwalter said.
Compare that with payday lenders, which in Indiana can charge a 391 annual percentage rate. But even with such poor terms for the borrower, Markwalter said, he understands why payday loans are so popular.
"The most attractive thing about a payday loan is that instant access to cash," Markwalter said. "Most people who go into taking a payday loan are either behind on some of their bills, or they had something that threw them out of financial equilibrium."
For JIFFI clients, that can often mean a car breaking down, preventing them from getting to work and earning money, Markwalter said. For these clients, losing a job isn't an option. So they turn to what is often their only source of quick cash available: payday loans.
"But it comes at a high price tag, and that's the high interest rates," Markwalter added.
The reliance on such high interest, short-term loans to resolve emergency money needs creates a cycle that can be hard to escape, said Vincent Vangaever, JIFFI vice president of financial empowerment.
"(The loan) is very short term โ usually a period of 10 days to two weeks where you're required to pay back the entire principle in addition to the interest," Vangaever said. "If an individual doesn't have $500 today, why are they going to have $550 in two weeks?"
JIFFI loans have always come with an element of financial education attached, Vangaever said. But JIFFI has expanded to offer financial empowerment courses to kids and also adults regardless of whether they aim to take a JIFFI loan. They see it as another way to achieve their mission.
"In the beginning, it's very, very basic, explaining what a budget is, how you can save โ these really important lessons that a lot of students aren't taught in schools," Vangaever said.
Along with adding the classes, JIFFI has also grown significantly in its three years, now employing 40 students. In 2013, JIFFI made three loans to clients in South Bend. Now Markwalter said JIFFI has made 32 loans, but wants to grow bigger still and increase that number by directly reaching those who need their services.
Most of their clients hear about JIFFI through charity organizations. Bridges Out of Poverty, for instance, connected Patterson to the loan program.
Amber Werner of Bridges Out of Poverty said she is glad to connect those in need to JIFFI. "It's a fine opportunity for people in South Bend to break the cycle of living with payday loans and to learn and understand the importance of credit," Werner said.
But those who wish to apply can reach out to JIFFI directly, Markwalter said. Then they can fill out an application.
Like any other lending institution, JIFFI does expect to be paid back. But in this, too, it differs from the terms of a payday loan, Patterson said.
"I kept communications open with them. If there came a time I couldn't pay them, I called them, and they were fine with that. There was only time that it happened."
But in the end, Patterson did end up paying off her loan from the "JIFFI boys."
"My last payment was on February 13th, which was my birthday," she said. "I would never go to another payday loan place."
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Source: South Bend Tribune, http://bit.ly/20zwNdd
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Information from: South Bend Tribune, http://www.southbendtribune.com
This is an AP-Indiana Exchange story offered by the South Bend Tribune.
