New workplace benefit: loans for low-income employees

More and more American employers are partnering with financial institutions such as credit unions to offer small personal loans to their workers, giving employees a way to weather financial crises without resorting to expensive payday loans. .

Wages of low-income workers are stagnating, supporting demand for small consumer loans. A Federal Reserve survey last year found that 44% of Americans had difficulty covering an emergency expense of $ 400. Many low-income workers do not have a credit history and do not have access to credit cards or bank loans.

New federal regulations cracking down on payday lenders are likely to create new needs for other forms of credit, but it’s still unclear who can fill the void.

No official statistics exist to show how many employers offer such programs, but several community networks with participating local employers have sprung up across the country in recent years. A program in Savannah, Georgia, for example, started in 2015 and another in Geauga County, Ohio, in 2014.

Rhino Foods Inc., a Burlington, Vt. Company that makes ice cream ingredients, has partnered with a local credit union to provide same-day loans of up to $ 1,000 with no credit check and no questions asked. questions to any employee who has worked in the company for at least one year. The current annual interest rate on loans is 16.99%, a fraction of the rates on payday credit – the small consumer loans used by millions of Americans each year – that can go up to 400%.