Twin Cities-based nonprofit Prepare + Prosper and Sunrise Banks will announce Wednesday a multiyear plan to provide thousands of low-income families with an alternative to payday lenders and check-cashing operators.
The Financial Access in Reach (FAIR) plan is aimed at providing "financially underserved" people with access to a checking, savings and small-loan program at a modest cost.
"The financial inclusion gap is a big problem," said Tracy Fischman, executive director of St. Paul-based Prepare + Prosper, which helps thousands annually with free tax preparation and financial counseling. "It negatively impacts people's economic footing, well-being, health, and more. People need financial products and a system that work for them and not against them as they strive to be financially successful."
Participants in the FAIR pilot project will be selected from Prepare + Prosper customers, as well as those served by partnering organizations. The pilot project will launch in January 2019 with about 500 people.
Participants will pay $3 per month for a checking account with no minimum balance and no overdraft fees. They will get a savings account and be able to borrow up to $500 at 8 percent interest.
It can cost far more than that to use payday lenders for short-term loans, particularly when borrowers fall behind on payments.
"Collaborating with Prepare + Prosper on the FAIR Initiative is giving people the tools they need to improve their financial wellness," Sunrise CEO David Reiling said in a statement. "We're setting an example for many financial institutions to follow, and working to change the way they do business."
Several years ago, Sunrise launched a growing payday-lender alternative with Lutheran Social Service of Minnesota and employers that allows employees to borrow against future income from their employers, financed by Sunrise, up to certain limits to help with unexpected expenses.
