KC Transactional Attorneys Help Create Non-Profit Alternative to Pay Day Loan

Three Kansas City area lawyers—Adam LaBoda, Kyle McCurry and Tom Schenkleberg-- have each played a central role in the creation of a new not-for-profit in Kansas City that will provide access to reasonable cost credit for low to moderate income people who might otherwise only qualify for payday loans.

The average interest rate on a Pay Day loan in Missouri is over 400%. Pay Day loans are perfectly legal in Missouri and there are times when they provide the only way for a person of modest means to get a short-term loan. For many borrowers, however, they can become a debt trap from which it is extremely difficult to escape. The borrower ends up taking out many loans to repay the original and then subsequent loans and ends up paying hundreds or thousands of dollars in interest on an original loan of just a few hundred dollars.

A new not-for-profit called Fair Community Credit (FCC) was formed in 2011 to facilitate loans at 36% interest to individuals who normally would have no other choice but to get Pay Day loans.

Three Kansas City area attorneys have each played a pivotal role in creating the new not-for-profit. Adam LaBoda of Spencer, Fane, Britt & Browne and Kyle McCurry of Stinson, Morrison, Hecker, LLP counseled the founders of FCC about the difficulties, in terms of regulatory compliance, of becoming a bank in its own right and came up with creative solutions that ultimately allowed FCC to partner with Central Bank of Kansas City to allow the loans to be made.

Because he also represents Central Bank, Kyle had to withdraw from the discussions when negotiations between FCC and Central Bank began. Adam, however, spent many hours as FCC’s pro bono counsel, working through the details of the contract between FCC and Central Bank. Kyle worked free of charge for Central Bank on the negotiations to reduce its project expenses. Those negotiations were completed in December 2011 and now Central Bank, with financial support and marketing assistance from FCC, is now making loans to low and middle income borrowers at 36% interest that are designed for people who otherwise would have to pay 400+% interest on a Pay Day loan.

FCC has approximately $200,000 in funding with which to facilitate loans. Its goal is to show that banks can at least break even on making these loans when they charge 36% interest. If they can meet this goal, FCC hopes to attract many other banks into this loan market and, by doing so, greatly reduce the cost of loans to people who cannot afford to pay 400% interest.

Tom Schenkelberg of Polsinelli, Shughart, PC has volunteered to handle FCC’s incorporation, the preparation of its Bylaws and Articles of Incorporation and its application for 501(c)(3) status. All of which are essential for the long-term success of the project.

Tom, Adam and Kyle are proving that transactional attorneys can make a major difference in their community through their pro bono work. All three volunteered through Legal Aid of Western Missouri’s Volunteer Attorney Project.