Rhode Island is in its fourth year of trying to reform payday lending in the state, and here at Capital Good Fund (CGF) not only have we been part of the lobbying effort, we’ve also launched our own payday loan alternative product. Funded by United Way of RI, this loan ranges from $300 - $500, carries an interest rate of 30% + a 4% closing fee, a one-year term and very flexible requirements.
In the 5 months since the product launched we’ve done nearly 70 loans with phenomenal repayment rates. Still, compared to the payday loan industry, which did $70 million in lending in 2011, that’s peanuts. And indeed our tiny scale fuels the industry’s argument that only by charging an effective APR of 260% can they afford to deliver these “essential loans.”