2009.08.14
The payroll loan
Virginia's plan to keep state employees, caught in a cash crunch, from heading to the corner pay-day or car-title lender appears to be helping many.
Gov. Kaine in an e-mail press release said during the first month of the pilot program, 1,310 state employees have taken out short-term loans valued at $641,657.
The process also allows for financial counseling.
The numbers show that there is -- as the predatory lenders say -- a need by people for short-term loans. And that there can be alternative programs that help people without trapping them in a cycle of debt.
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Another idea to help would be to add other flexible means to payroll. A company I worked for previously would allow you to cash out leave time you had built up and add it to your check, if you chose to do so. They would also let you take an advance, free of charge, on your upcoming check. That worked wonders while we were building our house and had fees come up for surveys, plats, an environmental assessment of the house we bulldozed, and other items. I was able to cash in some leave, take an advance, and get the costs paid as they came up, without incurring debt in the process.
Comment by Other John — August 14, 2009 @ 11:17 am
I don't know how such things work (if at all) in big companies, but I know many small companies will work with employees in such situations and have programs for advances at no or very minimal charge. It is the decent thing to do and helps people without adding to their burden unduly. I applaud any company willing to help their people.
Comment by Sandi Saunders — August 14, 2009 @ 11:28 am
Luanne, If the people default, what does the state do? Eat it? The payday lenders you disdain can't do that. They have to make a profit or go out of business. The government has no business engaging in this private enterprise. There is no way they can run it as efficiently.
Comment by Suzie — August 14, 2009 @ 4:14 pm
I might argue that it works best to have the employer doing this, even if it is the state or a government. They know what the payroll is like and can very easily incorporate the service into payroll accounting they already do. For my old company, it was a matter of filling in a single space in a program in the event an advance was issued. Have an automatic fixed fee applied or a % of the advance charged, and it's a very, very simple accounting matter that can be listed on a paystub. There's almost no additional work needed to provide this service, and the terms could be very clearly listed in an HR manual, rather than having a fine-print loan sheet to read.
Comment by Other John — August 14, 2009 @ 4:27 pm
Other John, That plan sounds reasonable. Do you or Luanne know if that's the way Virginia is doing it? Somehow I bet they're not.
Comment by Suzie — August 14, 2009 @ 4:39 pm
Here's a link to the governor's press release. It wasn't posted earlier.
It probably will answer your questions.
The program is in partnership with the Commonwealth of Virginia Campaign and Virginia Credit Union.
I always thought credit unions did a good job with small, emergency loans, and with setting up payroll deductions for repayment.
Comment by Luanne T. — August 14, 2009 @ 4:45 pm
Suzie, I don't. I also don't remember them offering this when I worked for the state, though it has been a few years. I remember that the Virginia Credit union did offer a lot of neat services, but I never got an account with them since I used 2 other area credit unions already. Credit Untions definitely do offer great service. If we were to use them for a car loan or home loan, they could set up automatic debits tied to each paycheck to split the payments more evenly, or do it on a fixed date once a month. I'll probably never use a bank again if i can help it.
Comment by Other John — August 14, 2009 @ 4:51 pm
Thanks, Luanne. The site says no taxpayer funds are involved, but the CVC is an arm of the state government, so I'm not sure that's true.
Comment by Suzie — August 14, 2009 @ 4:55 pm
"The payday lenders you disdain can't do that. They have to make a profit or go out of business."
Good. Yet another "industry" we'd be better off without.
Comment by Kristen — August 15, 2009 @ 7:56 am
Legitimate loan companies are being attacked. Business licenses, etc., give them the right to operate in a democracy.
The State doesn't need to add employees to handle loans. Government needs to stay out of the loan business.
The compilation of State employees' loan activities seems to be invasive.
Banks, if one qualifies for small loans, most often charge basic processing fees that raises the cost to a level near the simpler short-term loan company rates. Let alone, how about the near scandalous 'points' charged for some loans?
All short-term loan companies are not predatory.
Do people want the 'underground' to take over, exemplified by historical systems in-place in many cities? They even have their own versions of lotteries.
Comment by Know Nothing — August 16, 2009 @ 7:25 am
Do people want the 'underground' to take over, exemplified by historical systems in-place in many cities? They even have their own versions of lotteries.
Comment by Know Nothing — August 16, 2009 @ 7:25 am
When so called "legitimate" organizations like credit card companies can double your rates on a whim, it's difficult to figure out what the "underground" is. Or how we'd be much worse off. All that your point about banks illustrates is that banks have become more predatory, not that short term lenders are less so.\
The banks could use some honest competition, especially since they're screwing us over with money WE GAVE THEM IN THE FIRST PLACE.
Comment by Kristen — August 16, 2009 @ 4:46 pm