Helping employees out of financial trouble makes good business sense, according to Gov. Timothy M. Kaine. That’s why he unveiled a short-term lending program for the state’s 92,000 employees and called on other large employers to follow his lead.
“This program will allow our state employees to receive small loans without having to go to predatory lenders,” says Kaine. The program is believed to be the first of its kind for a state government.
By the first week of August, just three weeks after the program launched, 1,665 applications had been received. Of those, 1,036 loans had been approved for a total dollar value of $508,000, according to Michael Salster, director of employee services for the Virginia Department of Human Resources Management. “The response clearly shows how badly a program like this was needed,” Salster says.
With a tight credit market playing a major role in the recession, many workers in financial straits have been forced to turn to payday or car title loans, which can carry interest rates of as high as 450 percent, according to Jay Speer, executive director of the Virginia Poverty Law Center.
“I think the goal of the state employee program is, as it should be, to pass some sort of financial literacy along with the loan, to try to help people think about saving for emergencies so they don’t have to come back and ask for another loan — which is really the opposite of what predatory lending is all about,” says Speer.
Ward Scull, president of Virginia Transfer & Storage in Newport News supports the governor’s action. He has put his own employee loan policy in place after rescuing workers who were financially strapped. “An employee that is stressed by debt is simply not going to be as productive,” he says. “So employers really need to be more supportive and lend them a hand within reason. It’s a positive thing to do for the employee and also for the business.”
The Virginia State Employee Loan Program is a partnership between the Commonwealth of Virginia Campaign and the Virginia Credit Union. Employees can borrow $100 to $500 at a 24.99 percent annual interest rate. The loan must be paid back within six months. and employees are required to complete an online financial fitness course.
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