‘It has changed my life.’ New program aims to help people saddled with predatory car loans

What kind of difference can an extra $150 a month make?

To some people, the difference might seem inconsequential.

For Cindy Bergee, a 54-year-old resident of Tacoma’s East Side, it’s been anything but.

Bergee is one of the first individuals to take advantage of a new program from Sound Outreach and Harborstone Credit Union designed to help people who depend on their vehicles get out from underneath predatory car loans. She recently discussed the impact that going from a loan with 25 percent interest to one with 13 percent interest had on her life.

“I was crying,” Bergee said of learning the loan refinance had gone through. “Tears in my eyes.”

A 10-year employee of the Tacoma Housing Authority who depends on her car for work, Bergee said she had a string of old, often-broken down vehicles until a couple years ago when she just couldn’t take the cost and hassle of it anymore.

On the advice of her boyfriend, Bergee ended up at a local car lot and drove away “in an hour and a half” with the car she wanted. The vehicle also came with an interest rate that strapped her finances.

With an interest rate of roughly 25 percent, Bergee’s car payment on a 2015 Jeep Cherokee was $535 a month by the time things were said and done.

Now, thanks to the auto loan refinance program that Sound Outreach — which also involved regularly meeting with a financial counselor — she pays a more reasonable $392.50 a month.

Bergee said she always made the previous payment on time, sometimes putting off other bills to do so, even though it often “was tough — very, very tough.”

“It’s given me a little more wiggle room,” Bergee said of the refinancing. “I’m not sitting here going, ‘Well, I’m going to have to hold down three jobs just so I can make a car payment and make my other bills and all this stuff.’”

Bergee said she felt she had no other choice than taking on the high interest rate since she needed a reliable way to get to work and she had a recent bankruptcy on her record.

It’s exactly the scenario that makes predatory car loans an unfortunate reality — one that thousands of hardworking people in this community are dealing with. As Allen Sloan, a business columnist for the Washington Post, noted earlier this month, “sub-prime auto loans are growing rapidly” in the United States.

According to Sound Outreach executive director Jeff Klein, that’s exactly the problem the new program — made possible by a $776,000 Community Development Financial Institution award from the U.S.Treasury Department — hopes to address.

It’s also why Klein believes it can make a big difference in people’s lives.

“Saving $200 a month, or $150, in the socioeconomic level of the folks we’re talking to can provide extra flexibility in their budget,” Klein said. “And once you get to a place where you don’t have that scarcity mindset, you can begin to operate with a little less stress in your life, and you can start to talk about strategies to pay your bills on time and not deal with that financial volatility that goes along with struggling to make ends meet.”

The approach — which focuses heavily on helping people to achieve financial stability — is smart and indicative of a shift increasingly seen from both government and local services providers. As Tacoma and Pierce County grapple with the intertwined crises of homelessness and housing affordability, being proactive instead of reactive is key.

Up until a few years ago, Klein said his agency was one of many focusing on things like rapid rehousing and helping people enroll for food stamps, health insurance or income support benefits.

Klein said he realized that working with the same population before they faced a crisis like homelessness or eviction could have a significant impact.

Today, Sound Outreach largely focuses on helping low-wage earners connect with higher-paying, entry-level jobs in fields like construction or coordinated care. It also provides financial counseling and resources for a population that often lacks it or doesn’t have access to mainstream banking institutions.

In a matter of a little over a year, Sound Outreach went from having one financial counselor on staff to 10 and has plans to add two more soon.

“We doubled or tripled down on financial wellness,” Klein explained. “Moving people from stability to prosperity — that’s really our focus now.”

Five people have taken advantage of the program in the three weeks since it officially launched, Klein says, with “more in the pipeline.”

By October or November, Klein hopes that number will be up to 20 auto loan refinances a month.

For her part, Bergee is telling anyone who will listen.

“It has changed my life. I can manage my bills now, and not have to worry about it. And now I’m able to do a savings account,” she said.

“It’s like, ‘Wow, I’m doing this. I’m really doing this.’”

This story was originally published September 21, 2018 at 4:46 PM.