Leech Lake credit building program offers refuge from predatory lenders
Payday loans often have interest rates in the triple digits. Rob Aitken, executive director for Leech Lake Financial Services, is offering clients a way to use their paid-time-off as collateral for consumer loans.
CASS LAKE — Leech Lake is engaging in innovative lending with a credit builder program giving otherwise unqualified borrowers a chance to use their vacation time as collateral for personal loans.
Rob Aitken, executive director of Leech Lake Financial Services, created this Credit Builder program in the face of predatory lending and mortgage denial rates 5 times the national average on the Leech Lake Reservation.
Aitken said the idea came from the Leech Lake tribal government’s payroll advance system, using an employee’s earned vacation time as collateral for loans that can help build credit. Aitken said this program began in 2013.
“We’re trying to increase the quality of life for our folks and that starts with having a house and a decent place to live,” Aitken said. “Over the years, the No. 1 reason people use our credit builder program is because they want to buy a house.”
The Blandin Foundation recently granted $350,000 to expand the capacity of this program, which Aitken said is in high demand.
“Our reservation is surrounded with predatory lenders, and folks that don’t have anywhere else to turn to for a loan, that a bank won’t make, will go to these predatory lenders,” Aitken said.
Payday lenders, known for their aggressive sales tactics and using asset-based collateral, typically have interest rates in the triple digits, with some of these loans seeing interest rates at nearly 400%.
Consumer loan funds from the Credit Builder program, Aitken said, have between 5%-12% interest rates that haven’t changed with the recent rate hikes across American financial institutions.
Valerie Martin with the Blandin Foundation calls the program a “great example of rural and Native leadership and innovation.” other programs like this aren’t available across the country, she noted.
“We’re trying to increase the quality of life for our folks and that starts with having a house and a decent place to live."Rob Aitken
“It could be a game-changer for rural, Native or low-income areas nationwide, enabling more workers to build wealth,” stated Martin in an email.
As Leech Lake looks to increase development of housing, Aitken said having qualified borrowers is crucial for success.
“As we see the increase of housing inventory, they’re going to need qualified borrowers to move into those houses. We are the ones that will provide the qualified borrowers through our credit building programs.”
Aitken said the program is very successful with a minimal default rate, and he is surprised more employers in the area aren’t offering this benefit to their employees.
“We issue the loan to the employee, the payments are deducted out of their checks, and once the loan is paid, those leave hours are freed back,” Aitken said. “If your employer is willing to take the time to freeze those leave hours and hold them against the balance of the loans, they get paid off when an employee leaves employment.”