The Mississippi Center for Justice will launch an initiative to loosen the stranglehold of predatory lending in America's poorest state by dramatically expanding the availability of fair lending and opportunities for asset creation. The Center and its partners commit to accelerate the pace and broaden the scale at which employers, banks, credit unions, labor unions, schools and universities, funders and nonprofits will join the campaign to make fair lending a fact of everyday life for all Mississippians.
This initiative will result in the development and availability of fair lending alternatives that enable employers to offer small-dollar loans on reasonable terms to workers who currently lack bank accounts or are not qualified for traditional bank loans. This 'first of its kind' initiative in the state will generate multiple benefits for Mississippi workers, families, businesses and communities. Its collective impact will include improved income management and financial stability, increased worker productivity and job stability, and greater capacity of individuals and families to save money and grow assets. The campaign will have application in states throughout the country.
The Mississippi Center for Justice and its network of lawyers, community organizers, development professionals, and communications specialists will recruit employers, financial services providers and others as partners.
Mississippi lending institutions, including BankPlus and Hope Community Credit Union, have already created alternative loan products, and others like Regions, The First Bank, and Trustmark are following suit. More than a quarter of Mississippi's credit unions now offer a reasonably priced small-dollar loan product accompanied by financial literacy training. The Center will accelerate this process by partnering with other financial institutions.
The Center will also target the state's largest employers to participate. In recent meetings with business and banking leaders, the concept of employer-based small loan products was extremely well received. The chief financial officer of Sanderson Farms, one of the state's largest employers with 4,500 workers at four plants, voiced his company's concern that 75 percent of these workers lack bank accounts and often turn to predatory check cashers. Casinos, which employ 10,000 workers on the Mississippi coast, have also expressed interest.
In the first phase of the campaign, September - December, 2012, the Center will form a working group to guide the design and implementation of the initiative. The working group will determine appropriate safeguards for fair lending products such as rate and fee caps, recruit employers and lending institutions as participants identify and recruit other nonprofit partners, develop metrics to measure the success of the campaign, and solicit funders. This group will include representatives from banks, credit unions, employers, and state and community-based nonprofits.
In Phase 2, beginning January 1, 2013, and continuing through December 31, 2014, the Center and the working group will focus on soliciting participation from banks, credit unions, colleges and universities, hospitals and other health care providers, labor unions, private businesses, and municipalities across the state.
In Phase 3, June 1, 2013 and continuing through August 31, 2015, the Center will develop and disseminate educational resource materials; create a dedicated sub-site of the Center's website to provide information for consumers and participants about small dollar fair lending products. Center attorneys and pro bono law firm partners will provide legal support to participants during the design and implementation process. The Center's communications staff will support the working group in developing a media campaign to promote the initiative to target audiences. The Center's policy staff will support the working group by gathering agreed-upon data and charting the campaign's progress.
Mississippi is the nation's poorest state, with nearly 22 percent of residents living at or below the poverty level. The state ranks at the bottom of most indicators of social well-being, including those that measure children's health, literacy, teen pregnancy, income security, opportunity to make a living wage, and access to safe and affordable housing. Mississippi also has the highest percentage of African-Americans in the country (38 percent). Mississippi's legacy of economic injustice has its roots in slavery and in a sharecropping system that practiced predatory lending at the plantation store. The legacy features prominently in public policies that continue to this day to inhibit asset and wealth creation by low and moderate income Mississippians, especially in communities of color.
Mississippi has fewer bank customers per capita than any state in the country. More than 16 percent of the population lacks a checking or savings account, and 25 percent of Mississippians are 'underbanked,' that is, they have an account but continue to rely on predatory financial services, including payday loans, check-cashing services, rent-to-own agreements and pawn shops.
Mississippi has long been targeted by predatory lenders. When payday lending swept the nation in the 1990's, Mississippi enacted a particularly pernicious version authorizing a fee of $22 per $100 for a two-week period, for an annual percentage rate (APR) of 572 percent. Yet Mississippi has not followed the growing national trend of reforming abusive lending practices. In 2009, the payday industry was a $1.2 billion enterprise in the state, collecting more than $270 million in fees from Mississippi borrowers. Mississippi leads the nation in the per capita concentration of payday lending stores.