From the St. Louis American.
Katherine Faulkner recently found herself in need of a new car. What she and many other area residents – especially those in underserved neighborhoods – did not need was a predatory interest rate on the car loan.
Faulkner’s interest rate was higher than 20% and her car payment was holding her back financially. She learned she was eligible for a pilot program established by Justine PETERSEN and the NISA Charitable Fund for drivers withchallenging personal credit scores.
The “Drive” auto loan refinancing program refinanced Faulkner’s loan, lowering her interest rate to 6% and reducing her monthly car payment by more than $120.
“They are such nice people and so patient,” Faulkner told The St. Louis American of the Drive program staffers who assisted her. Refinancing requires “all your documents, but it was pretty easy.”
NISA invested $250,000 to launch the program in February. It has closed six refinancing loans, and also provides financial credit counseling and other support, according to Galen Gondolfi, Justine PETERSON chief strategy officer.
“We consider it a new face of poverty,” Gondolfi said of high car loan rates.
“Challenging credit scores [transitions] into high car insurance rates too. It is an anti-wealth building factor. Think of what kind of money is leaving neighborhoods that could be cycled back in for housing, education and more.”
Gondolfi added that his firm’s analysis shows some area residents paying more on car related payments than housing payments.
Justine PETERSON is one of about 1,100 Community Development Financial Institutions [CDFI]in the nation, according to Gondolfi. His hope is that Drive and similar programs will gain traction nationally and attract more investment.
“Research shows that those with subprime credit in St. Louis are paying an annual interest rate of approximately 20% for their auto loan, which consumes a disproportionate share of their monthly income,” Robert Boyle, Justine PETERSEN founder and chair said in a statement. “Low- to moderate-income households can stretch their dollars if they work with a CDFI to rein in their high-interest auto loans and participate in a comprehensive credit counseling program.
“With NISA Charitable Fund’s vital financial and operational support, the initial results of our pilot program are encouraging,” Boyle added, “and we hope to expand our partnership base and participant pool during the second half of the year.”
David Eichhorn, NISA CEO and head of investment strategies called DRIVE “precisely the type of meaningful impact we want to achieve in our collaborations with community organizations in St. Louis,”
“Our work with Justine PETERSEN is about yielding tangible, scalable results and remaining true to NISA Charitable Fund’s mission to support organizations that are improving access to capital among traditionally underserved groups in St. Louis.”
Justine PETERSON describes itself on its website as a CDFI, HUD-certified housing counseling organization, and U.S. Small Business Administration microlender that offers “financial products and services that build 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 elated her interest rate was reduced and that she is saving money each month as a result.
“It was a great 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 lending for over 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-loan division agreed to pay $21.9 million in restitution to thousands of Black, Pacific Islander, and Asian customers after the government alleged they were charged higher interest rates than white borrowers. Federal agencies said 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 American financing agreed to refund $24 million to borrowers to settle federal investigations alleging it discriminated against minorities by charging them higher interest rates on auto loans than white customers.