Community Honor Fund
Organized by: Doug Chan
The Community Honor Fund is a NEW, student-led initiative tackling the predatory payday lending industry. We offer both affordable short-term loans to University of Virginia-affiliated employees and personalized financial coaching. Donate today to say no to an industry that makes millions off of the backs of the poorest. Watch a video to learn more!
Meet Mary. She's a hardworking UVA Dining employee of over 20 years. She makes near minimum wage, can only work 30 hours a week, and is laid off during the summer. Times are tough but she gets by.
She gets home one day, and her landlord calls her about raising rent, again. Frazzled, with little to no savings, she doesn't know what to do. However, on her way back from work one day, she spots a "Quick Cash Advance" sign, and decides to stop in, where a friendly man gladly lends her a small sum of $500. She has just taken out a payday loan.
A payday loan is generally a short-term loan of under $500, secured by one's next paycheck. Payday loans are the worst. They are a nice relief in the moment, but the interest charges can be upwards of over 400%. Furthermore, the high interest makes it extremely difficult to pay off by next pay period, forcing customers to take another loan. The average borrower stays in debt five months out of the year, takes on eight payday loans annually, and pays $520 of interest on the average loan size of $375. In Charlottesville, where the anchor employer (UVA) lays off its employees during the summer and winter time, times are even tougher, bringing rise to over 10 payday loan stores in the area.
The Community Honor Fund is a new campus microfinance institution (MFI) that aims to break this cycle of poverty. We plan to offer two services:
1. An unsecured, short-term loan with low interest rates (<12% APR). We will fill out the loan application with the client and work to establish a flexible, multi-month payment plan.
2. Personalized financial coaching. We will leverage University and other resources to educate our community about the virtues of sound financial planning.
We need $1000 to begin operation. The money will be used in the following way:
$75: For the nonprofit incorporation fee
$300 x3 = $900: Enough capital to lend to three individuals, to prove to donors we can handle more capital
$25: Miscellaneous printing expenses
Continue reading for more detailed progress about our project.
Our progress to date:
1. Over 25+ thought leaders contacted in the nonprofit/payday loan alternative space, most of whom our team held face to face or phone interviews with. A sample of the institutions contacted include: Virginia National Bank; Center for Nonprofit Excellence; UVA administration, including Chief Human Resource Officer, Treasurer, Associate Deans, and General Counsel; McIntire (Commerce) and Batten (Public Policy) Professors; UVA Community Credit Union; Charlottesville Investment Collaborative, Legal Aid Justice Center, and more. Vast majority of those contacted are upper-level management or CEO/Founders (if applicable).
2. Over 50+ surveys conducted of our target demographic, with preliminary results supporting our business hypothesis that there is a large, small dollar loan market currently exploited by predatory lenders.
3. Pending partnership with BankOn Greater Charlottesville, after recent high-level meeting with senior management.
4. Full support from Lend for America, a campus microfinance institution (MFI) network. I am currently spending my summer as a Lend for America Fellow, where I am interning at a campus MFI and am receiving direct mentorship from Lend for America's Executive Director.
5. Multiple points of contact with other campus MFIs, including JIFFI and Capital Good Fund.
6. In-depth research conducted on the fringe lending industry in the United States as well as in Charlottesville. Thorough understanding of both payday lending regulations and small, non-profit lending, as well as understanding of credit and credit reports.
7. Near-solidifed underwriting legal documents, including Truth-in-Lending disclosures, fee schedule, and loan agreement. Basic process of underwriting procedure drafted and close to finalizing.
As you can see, our team has made significant progress in the last few months, and we are well prepared to test our business model and are committed to serving our fellow UVA-affiliated employees.
If you have any questions, feel free to contact me directly at email@example.com. Thank you so much for your time and your support!