The combination of persistent poverty and little state regulation has made St. Louis “a hotbed for fringe banking, check cashing and payday lenders” charging an average 450 percent APR to borrowers who can least afford it, says Patrick Adams, CEO of St. Louis Community Credit Union.

That makes the city a great place to experiment with how best to counter predatory lending, and $260 million St. Louis Community CU has stepped up to the challenge. In 2009, the CU launched Prosperity Connection, a nonprofit financial education organization, which in turn has partnered with community and faith-based groups and private funders, including banks aiming to meet their Community Reinvestment Act requirements, to create the RedDough Money Center.

The cornerstone product of this nonprofit lender, which operates out of two offices in low-income neighborhoods, is the “Helping Hand Loan,” an installment loan up to $1,000 at a maximum 36 percent APR with a repayment period of six to nine months.

RedDough, which is staffed by former employees of payday lenders, also offers check cashing, money orders and wire transfers, reloadable debit cards and postage stamps—“everything a fringe lender would do, at a lower price point,” Adams notes.

 

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