SPRINGFIELD, Mo.–While the partial federal government shutdown has ended, at least for now, concerns are being expressed that many of the federal workers who missed paychecks may have turned to payday lenders and other small-dollar loans that come with high rates and unfavorable terms.
One result has been a surge in the stock prices of some payday loan companies.
At the United States Medical Center for Federal Prisoners here, for example, where more than 3,000 workers have missed paychecks, there were reports of a host of creditors and bill collectors chasing workers, including the repo man, NBC News reported.
“While many struggle to make ends meet during the shutdown, some have turned to small-dollar loans to fill the financial vacuum that comes as a result of the ongoing battle raging more than 1,000 miles away in Washington,” NBC News said.
“Staff are going to the food bank here in Springfield,” Karrie Wright, president of the American Federation of Government Employees Local 1612, told NBC News prior to the agreement to re-open the government. “They’re calling their mortgage companies, they’re calling their electric companies and phone companies to see what they can do. We’ve had repo trucks try to come into the parking lots where we work. That’s what’s happening to my coworkers.”
400% Interest Rate
NBC News noted that a move by the Trump administration to rescind some Obama-era protections means the average rate for payday loans in Missouri are more than 400%, according to a study by the Federal Reserve Bank of St. Louis.
NBC News further reported that World Acceptance Corp., which provides loans between $300 and $4,000, and EZCorp, Inc. which runs hundreds of pawn shops and payday lenders across the country, have each seen their stock rise nearly 19% since the government shutdown began.
World Acceptance told NBC News it had seen an uptick in customers requesting deferred payments and using their services to get a loan against their future tax refunds since the shutdown began.
Chad Prashad, the company’s president and CEO, said the company was also offering payment deferrals for existing customers and up to $1,250 in loans for 0% interest and no fees for 10 months.
EZCorp, Inc. said it had entered a "quiet period" and declined to comment to NBC News.
CU Partnership is Cited
The NBC report did include mention of a partnership between the Community Foundation of the Ozarks and Multipli Credit Union to provide federal workers no-interest loans of up to $1,500 with repayment based on the receipt of the employee’s paycheck after the shutdown ends, which CUToday.info reported here.
Bill Would Require Treasury to Help
Meanwhile, in Washington, Rep. T.J. Cox, a freshman Democratic congressman from California, introduced a bill that would have required the U.S. Treasury to provide $6,000 no-interest loans to federal employees during the government shutdown. The bill has 86 co-sponsors and is in committee.
Cox called the shutdown “completely irresponsible” and said prior to the re-opening of government that he hoped his bill would mean employees wouldn’t resort to payday lenders to “bear the burden of the federal government.”
“They were put in this position, and not because they weren’t doing their jobs,” Cox told NBC News. “They were put in this position because of the distraction of this administration trying to make a political point.”