Katherine Faulkner recently needed a new car. What she and many other area residents — especially those in underserved neighborhoods — didn’t need was a predatory interest rate on the car loan.
Faulkner’s interest rate was over 20% and her car payment was holding her back financially. She learned that she was eligible for a pilot program set up by Justine PETERSEN and the NISA Charitable Fund for drivers withdifficult personal credit ratings.
The “Drive” car loan refinance program refinanced Faulkner’s loan, lowering his interest rate to 6% and reducing his monthly car payment by more than $120.
“They are such kind and patient people,” Faulkner said. The American of St. Louis Drive staff members who helped her. Refinancing requires “all your documents, but it was pretty easy.”
NISA invested $250,000 to launch the program in February. She has secured six refinance loans and also provides financial credit counseling and other forms of support, according to Galen Gondolfi, Chief Strategy Officer Justine PETERSON.
“We see it as a new face of poverty,” Gondolfi said of high car loan rates.
“Tough credit ratings [transitions] in high car insurance rates too. It is an anti-wealth factor. Think about the kind of money that leaves neighborhoods and could be repurposed for housing, education and more.
Gondolfi added that his company’s analysis shows that some area residents pay more for car-related payments than housing.
Justine PETERSON is one of approximately 1,100 community development finance institutions [CDFI]in the nation, according to Gondolfi. He hopes Drive and similar programs will gain traction nationwide and attract more investment.
“Research shows that those with subprime credit in St. Louis are paying an annual interest rate of around 20% for their car loan, which consumes a disproportionate amount of their monthly income,” said Robert Boyle, founder and president of Justine PETERSEN in a press release. Low-to-moderate income households can stretch their dollars if they work with a CDFI to limit their high-interest auto loans and participate in a comprehensive credit counseling program.
“With vital financial and operational support from the NISA Charitable Fund, early results from our pilot program are encouraging,” Boyle added, “and we look forward to expanding our partnership base and participant base in the second half of the year. year”.
David Eichhorn, CEO of NISA and Head of Investment Strategies, called DRIVE “precisely the kind of meaningful impact we want to achieve in our collaborations with community organizations in St. Louis,”
“Our work with Justine PETERSEN is about achieving tangible, scalable results and staying true to the NISA Charitable Fund’s mission to support organizations that improve access to capital among traditionally underserved groups in St. Louis.”
Justine PETERSON describes herself on her website as a CDFI, a HUD-certified housing counseling organization and a US Small Business Administration microlender that offers “financial products and services that create assets and change lives.”
According to the St. Louis-based NISA Charitable Fund, its mission “is to promote equity in St. Louis among underserved populations by supporting organizations focused on creating systemic change in education, access to capital and workforce development”, and “is 100% employee-owned.
As for Faulkner, she is delighted that her interest rate has been reduced and that she is saving money each month.
“It was a big change for the better, and now I have more money in my pocket to meet my other monthly expenses,” she said.
Faulkner is African American and the Justice Department has focused on discriminatory auto loans for more than a decade.
In 2013, Ally Financial Inc. agreed to pay $98 million to settle federal allegations of discriminatory auto pricing.
In 2017, Toyota’s auto lending division agreed to pay $21.9 million in restitution to thousands of black, Pacific Islander and Asian customers after the government alleged they had been charged high rates. higher interest than white borrowers. Federal agencies said that from 2011 to 2016, borrowers of color regularly paid Toyota between $100 and $200 more per month due to higher interest rates than white borrowers.
In 2015, Honda Motor Corporation’s U.S. finance agreed to pay back $24 million to borrowers to settle federal investigations alleging it discriminated against minorities by charging them higher interest rates on car loans than white customers. .