Kansas City — a hotbed of illegal payday loans — has hatched a million-dollar idea to combat the oft-criticized industry.
On Tuesday, the Rockefeller Foundation and the Chan Zuckerberg Initiative announced that Onward Financial Inc. is one of 10 companies nationwide to receive $1 million grants through the Communities Thrive Challenge. The winners were chosen from more than 1,800 applicants nationwide.
Onward Financial is a program for employers that encourages their employees to start a savings plan, learn about personal finance and, if necessary, borrow for emergencies at low interest rates. The program works through an app.
“I’ve been working on this for about two years,” founder Ronnie Washington said of the personal finance app. “That means everything, quite honestly.”
The money roughly triples his budget. That means hiring staff and expanding the program beyond its still tiny footprint in Kansas City. As the youngest recipient of grants, Onward Financial is getting validation that could open more doors and help attract other funders.
Washington, which is based in Washington DC, launched the program in Kansas City in part because it’s a hub for the payday loan industry.
Kansas City was home to an illegal $2 billion payday loan operation run by Leawood businessman and race car driver Scott Tucker. Tucker was ordered to pay the Federal Trade Commission nearly $1.3 billion and was sentenced in January to more than 16 years in prison. His brother Joel Tuckera Johnson County businessman, was hit with a $4 million judgment in favor of the FTC and faces criminal charges he operated a bogus payday loan scheme.
“We wanted to launch this in Kansas City for a number of reasons, including a lot of the work (The Star) Steve Vockrodt had done on Scott Tucker and the payday loan industry there,” Ben White said. , who previously worked. with Washington at Onward Financial and is now with the Aspen Institute Financial Security Program in Washington D.C.
The Kansas City payday loan industry also produced the bankruptcy of a Kansas City company that financed payday lendersindictments against two Native American tribesa $613 million fine against the American bank, another Kansas City payday lender jailed, a controversial decision by the Consumer Financial Protection Bureau and an episode of Netflix’s “Dirty Money” series.
Meanwhile, Kansas City has supported Onward Financial through a city startup partnership program, local credit union, business accelerator program, and a plumbing supply company based in Grandview.
“Since we started, we’ve been trying to save our employees money,” said Joe Poskin, who runs Prier Products.
The maker of outdoor faucets found in most home backyards has launched a vacation savings plan for less than 100 employees. But he wanted something permanent, something to help employees prepare for life’s financial emergencies the same way a 401(k) plan helps them prepare for retirement.
Something other than payday loans when employees needed help with a car repair, medical bill or other emergency.
Washington said a classmate introduced him to Poskin and Onward Financial found a home for his first test. Poskin said nearly all employees now participate in the program.
Onward Financial had been one of five startups in the city’s 2017 Innovation Partnership Program. He teamed up with Kansas City Credit Unionwho helped Prier Products employees open accounts and provided the loans locally.
Washington also participates in NBKC Bank Fountain City Fintech Acceleration Programworking towards a conclusion next week.
Kansas City’s Paydays story has inspired other startups. SoLo Funds, which developed a peer-to-peer lending applicationparticipated in the Techstars Kansas City Accelerator last summer.
Poskin said he views the Onward Financial program as introducing a new basic social benefit, alongside 401(k) plans and health insurance.
“That’s our vision. That’s exactly what employers are going to do,” Poskin said.
Onward Financial “quickly rose to the top” in candidate ratings, said Rachel Korberg, associate director of the Rockefeller Foundation.
She said its relationship with Missouri was also attractive, beyond Silicon Valley and New York, as well as the way it involved employers in creating financial security for low- and middle-income workers. .
Each nominee was judged on their impact on improving life in the communities where they work, the potential to increase the scale of the operation or serve as a role model for other communities, how deeply connected to the communities it served and the history and commitment of its leaders.
Other grant recipients included groups involved in preventing violence and providing alternatives to detention, connecting those in need with programs that provide benefits, and expanding opportunities for immigrants and residents of the region. working class.