Guadalupe Credit Union’s financial coaches were frustrated that they were limited in what they were able to lend to credit-challenged members. They knew that members were losing thousands of dollars waiting to qualify for loans.
As a response to this crisis, the staff at Guadalupe developed a Predatory Debt Relief loan (PDRL) in May 2017. The pilot loan was structured so that credit-challenged members could easily qualify if they met the following obligations/criteria: the borrower needs to meet at least twice with a Financial Coach and be able to demonstrate either $0 or positive cash-flow; the monthly payment must be 20% or less of the borrower's monthly income; the borrower must commit to meet monthly with a financial coach for a full year, and be able to demonstrate two years of continuous employment.
The program was a success, but by early 2019 it became clear that the pilot project was not large enough to cover title lending loans, a popular product among Guadalupe’s membership.
In March of last year, the team at Guadalupe launched a solution: the PDRL Title Loan. The Title Loan product was very similar to the unsecured loan launched in 2017, with the addition that the vehicle for which the loan is used must be the primary form of transportation with full insurance coverage. Also, 10% of the payment amount is set up to deposit into an Auto Maintenance Savings Account.
In one typical instance, a predatory title lender was charging a rate of 130.68% APR on $8,554.53 in financing, requiring 48 monthly payments of $962, Guadalupe’s PDRL Title loan featured a 15.99% APR on financing of $9,882.58 with 40 monthly payments of $242.
As of February 2020, the PDRL program has been a ringing success for Guadalupe's members, with loans of $341,755 to 90 borrowers, for savings of $496,963! There has been one delinquent loan of less than $5,000 from a member out of state dealing with a sick relative, and one charge off last July of less than $3,000 from a member who passed away.