SMITHFIELD, R.I. — Navgiant CU and several nonprofit groups have developed a new payday loan program they hope will convince state lawmakers to ban traditional high-rate payday loans.
The United Way has provided a grant of $57,000 to run the initiative, called the Woonsocket Payday Loan Alternative Program, with help from the Capital Good Fund. The grant covers only operational costs.
The program will make loans with a line of credit provided by Navigant CU with guarantees supported by Amica Insurance of Lincoln, R.I. The program kicked off Monday in Woonsocket. It plans to make small, short-term loans, typically in the range of $300 to $500, with interest rates capped at 36%. That's a fraction of the 260% APR Rhode Island state law allows for so-called payday lenders.
The storefront where the pilot program will operate is located in Heritage Place, owned by NeighborWorks Blackstone River Valley, which also maintains its headquarters there.
The United Way and the Capital Good Fund were both active in unsuccessful lobbying efforts for payday lending reform in 2012.
