The last time Leon Cox took out an auto-title loan was about six years ago. He was working a temp job and he wasn’t in a solid place financially.
Then, his car broke down.
“I didn’t have an alternative, and I needed the money because I needed to get the work,” Cox said.
Cox said he’d turned to payday and auto-title loans several times over the years. He knew they weren’t a great option, but they were the only option he knew about when he needed cash to cover an unusually high bill or some other expense.
Cox hated the way he’d owe more money than he’d borrowed in the first place after making several payments, and hated the way the lenders would harass him. He said he felt trapped.
“They’re chasing you every payday. They’re knocking on your door, they’re calling your phone, saying ‘Hey, you know you owe us. You owe us.’” Cox said. “And then every time you look at the balance of what you owe, it’s like you’re paying all interest. You don’t see any progress [on the principal].”
These days, the 40-year-old makes a pretty good living building heavy machinery. But he’s had to spend the last few years working to repair his credit, which was dinged every time he missed a payment on a payday or auto-title loan.
“It’s basically modern day loan sharking,” Cox said. “It’s a modern day loan shark. But instead of the 60s and 70s when a loan shark would show up at your door and beat you up, they beat your credit up.”
To begin repairing his credit, Cox turned to a credit union that was acquired by his church seven years ago.
Faith Cooperative Federal Credit Union is just a few rooms inside Friendship-West Baptist Church in southern Oak Cliff. About a thousand people are members, all affiliated with Friendship-West and St John Missionary Baptist Church.
Faith Cooperative does all the typical things a credit union does: savings accounts and mortgages and certificates of deposit.
What is less typical is a product line for people without good credit called Liberty Loans, six-month loans for $200 to $500.
Manager Stephanie Johnson says the loan product was crafted to be an affordable and lower-risk alternative to payday and auto-title loans.
“We have title loan stores on almost every corner, back to back to back, and so that’s all that this community was able to go to was those things,” Johnson said. “You had grandparents who were going to take advantage of those title loans because they don’t have any other options.”
A payday loan will typically carry 35 times more fees and interest than a Liberty Loan. Texas has the most expensive payday loan rates in the nation. And unlike auto-title loans, which are secured by the title to a vehicle, Liberty Loans don’t put borrowers at risk of seeing their car repossessed for missing a payment.
The loans were also designed as the first rung on a ladder of credit products the credit union offers to help people build credit and financial stability,
“It’s not so much what your credit looks like, it’s what you’ve done from that point,” Johnson said. “You may have fallen on hard times, so what we look at is: Have you gotten back on track? How can we help you get back on track?”
Faith Cooperative reports to credit rating agencies when a borrower pays back a Liberty Loan. That positive payment history increases a borrower’s credit score.
Payday and auto-title lenders don’t do that. They only when report a payment is missed, which hurts credit scores.
For Leon Cox, who’s been a member of Friendship-West for about a decade, working with the credit union to improve his credit has paid dividends.
“Every time I check my credit score, it’s steady going up,” Cox said. “And right now, I’m in the process of trying to buy a house, because me and my fiancée are getting married, so we’re looking for houses.”
Friendship-West’s leadership began laying the foundation for Liberty Loans nearly a decade ago.
The church had already helped get payday lending restrictions passed in Dallas in 2011, and after that, Pastor Danielle Ayers says church leaders started thinking about next steps. They asked the congregation if they’d be able to donate to set up a fund for small loans the church could offer.
“We raised quite a bit of money. People really responded to that call to action,” said Ayers, who is Pastor for Justice at the church. “But then I was like ‘Yeah, we don’t loan money. We are a church.’”
She said the church just wasn’t equipped to service loans, do collections, and comply with complicated federal banking regulations.
But around that time, a credit union founded in the 1950s by St. John Missionary Baptist Church was was struggling — and needed an infusion of cash and customers to keep afloat. That presented an opportunity for Friendship-West, Ayers said.
“It was a Black-owned credit union in the southern part of the city, and we did not want that to go away,” Ayers said. “So to keep that legacy alive, to keep it going, because we had raised the money, we were able to acquire the credit union.”
Friendship-West’s work to challenge the dominance of payday lenders in the community is part of a longstanding prophetic tradition within the Black church, Ayers said, a tradition of leveraging church resources to challenge oppressive institutions.
“We cannot just do charity alone. We absolutely have to pursue justice and we absolutely must deal with these structures that are broken and certainly do not benefit Black, brown and poor communities,” she said.
Faith Cooperative is small now, but there are plans to grow the credit union, to expand on its work of offering fair and affordable credit and banking to help the community thrive.