Mark Koller didn’t like the way payday loans can send low-income families into a downward spiral of debt. In his state of Nebraska, payday lenders charge 400 percent interest annually on emergency loans, with an average repayment time of 212 days. The terms are terrible, but low-income people often have few other options when they’re in a bind. So Koller is helping to form the first credit union for low-income families in Lincoln, Nebraska, offering an alternative to the 44 payday lenders operating in the city. The bank will be called Community Hope Federal Credit Union, and it’s already assembled a board and received approval from the federal government to proceed. If Koller and his allies succeed, the institution will become one of 2,000 low-income credit unions in the nation.
Community Hope Federal Credit Union plans to offer loans of up to $5,000 for six months or a year. Patrons will be offered financial literacy education opportunities so they can learn how to make a budget, save, and work toward owning a home.
Koller, who will manage the credit union, is seeking donations to raise $300,000 in financial backing. As he told Nancy Hicks of Lincoln Star Journal, when people use payday loans, “It’s steep, pretty dicey, and you can fall pretty fast.” Here’s hoping the Community Hope Federal Credit Union will be offering a smarter alternative to low-income Lincoln families soon.