Broward may become lender to its employees

Concerned about predatory lenders, Broward County officials said they’ll consider offering employees emergency loans with lower interest rates.

Commissioners agreed to seek bids from loan providers who might want to team up with Broward County, offering emergency loans of up to $5,000 to employees, including those with poor credit ratings.

The county employs more than 5,000 people, and union leader Dan Reynolds of the Federation of Public Employees asked for a loan program two years ago, referring to some lenders as “vultures.’’

“People who live paycheck to paycheck shouldn’t be taken advantage of just because past financial challenges, short sales, divorces or medical problems have left them with blemished credit,’’ he wrote in a letter to County Administrator Bertha Henry.

Employee emergency loans are offered by the Broward County School Board, Leon and Seminole counties, the cities of Fort Lauderdale and Dania Beach, and other governmental and nonprofit employers in Florida. A thirdparty vendor provides the loan, and it’s paid back by the employee.

Commissioner Mark Bogen brought forward the proposal Tuesday, saying payday lenders charge exorbitant interest, trapping people into an endless cycle.

Bogen said there are more than 120 payday loan stores in South Florida, charging compounding interest that equates to 240 to 300 percent.

Payday lenders verify that a person is employed and offer the loans based on the fact that a paycheck is coming.

The company used by the School Board for the loans, BMG Money Inc. of Miami, said its 23.99 percent interest rate is annual and doesn’t compound. A person can pay the loan off early without penalty.

A loan of $1,000, if paid over a year, would cost the employee $1,160, Tom McCormick, chief operating officer at BMG, said.

In contrast, typical payday loan customers are charged $51 for a $500, two-week loan, or 10 percent. But most customers return 12 times a year, McCormick said, paying $51 every two weeks. He said that equates to an annual interest rate of 265.9 percent.

Under the BMG program, employees would be taught financial literacy. The company would have to submit a bid for the job; commissioners opted not to waive the competitive process.

In other action, Broward commissioners Tuesday:

SALES TAX: Voted 6-3 to set a May 24 public hearing where commissioners will decide whether to put a seventh penny sales tax on the November ballot. The sales tax is 6 cents on the dollar, so the increase represents a 17 percent hike. A competing tax proposal endorsed by many Broward cities would increase the sales tax to a seventh penny to pay for infrastructure improvements. The county’s tax could only be used for transportation improvements.