THE BLOG
12/22/2014 10:35 am ET Updated Feb 18, 2015

Neighbors Helping Neighbors?

And how! You know all about the story of the Grinch Who Stole Christmas right?
Well, here is a tale of the exact opposite. Although it is not clear that this was setup to be in place right before the Christmas Holiday, that is how the timing seemed to work out.

Here is what is going on. You may or may not know the scoop on PayDay Loans. Sometimes referred to as a payday advance, a payroll loan, a small dollar loan or even a cash advance loan, this type of loan is nothing more than a short term loan. In essence, the borrower is pledging his/her next paycheck as collateral. In exchange, the borrower gets cash right now, as in handed over the counter.

However, as you might expect there is a fee for this service. Shockingly, depending on the state and county, this fee can be extraordinary. Although there are in fact some jurisdictions across the United States that regulate or even restrict this type of lending, there are many that do not. As of right now, PayDay lending is completely legal in 27 states. In addition to that, there are 9 other states that allow similar type lending, albeit with some restrictions in place.

Super High Fees
That's the background to the story. So what is this all about? The other side of the PayDay lending story has to do with those who find themselves in such a position that they need to use this type of service. You see, one problem, an issue that many critics of PayDay Lending point to as a reason to ban the practice completely, are the extraordinarily high fees associated with this type of loan.

Providers of PayDay loans argue that without high fees, they could not afford to offer the service at all. The providers maintain they are providing a service to the community. A service that traditional banks or lending institutions either can't or won't fulfill.

Inescapable Trap
But here's the thing to understand. There are far too many PayDay Loan borrowers who end up in a seemingly never ending trap. By the time, their next paycheck comes around, they owe so much interest (fees) on the last PayDay loan that they have to borrow even more just to stay afloat. You can see how this story plays out.

Yes, Virginia, there is a Santa Claus
Yet, there is at least one good Sanitarian out there. His name is Charles Jones and if you are in the Nashville, Tenn area you most likely know this guy's name. Mr. Jones is a developer in the Nashville area and he is not afraid to put his money down to make a difference.

Recognizing that PayDay Loans can be a never ending trap, Mr. Jones decided to do something about it. He recently plopped down a sizable amount of money to found General Education Association as his answer to this problem. Per him, the newly formed General Education Association will at first focus on seniors in the area and eventually move on to assist single parents.

Guaranteed Refi
Here is how General Education Association plans to help. The first step is a pilot project. This initial project will focus on a refinance plan for 50 to 100 seniors or even single parents. As Mr. Jones puts it"...a single $400 loan that currently costs them several hundred percent annually in interest and fees would be reduced to a 10 percent administrative fee of $40 a year that could be repaid over 10 months to a year or earlier."

In other words, Mr. Jones and General Education Association are effectively paying off the PayDay Lenders and then issuing new loans to the borrowers at a more realistic interest rate. Mr. Jones went on record to express his hope that if he and General Education Association can prove that his model works, that other groups and organizations around the country will adopt the model.

Worth It To Help
Finally, you can get a sense of what this is really all about from another one of his quotes to the media: "I'm not looking for ways to lose or gain money," he said, "but it's worth the risk to feel like you may be able to help somebody."

Well there you have it. Arguments for or against predatory lending notwithstanding, here is a real person making a difference. Here is someone willing to take a stand and help his neighbors. And just in time for the holidays too!