Need a loan? Forget the local payday lender – your boss has you covered

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Your employer can contribute to your retirement account or help pay for your health insurance. But will it help you set up an emergency fund? Or offer you a loan of a few thousand dollars when your transmission goes down?

If you work for Comcast Corp., yes.

The Philadelphia-based telecommunications and entertainment giant is delivering these and other benefits to its more than 160,000 employees at NBC Universal and other subsidiaries through a new benefits company backed by Comcast. This is the latest example of a large employer looking to get involved in the financial lives of their employees by offering not only education and advice, but real money.

Founded this year by the venture capital arm of Comcast, benefits company Brightside announced last month that it would offer loans through San Diego-based Employee Loan Solutions. Loans of $ 1,000 to $ 2,000 will be available to most employees, do not require a credit check, and are repaid through payroll deductions.

With an interest rate of 24.9%, loans are more expensive than the typical credit card, but are considerably cheaper than other types of debt available to borrowers with bad credit or little credit history. . Payday loans in California, for example, carry annual interest rates in excess of 400%.

“When unforeseen expenses arise, we want employees to have a more affordable option than taking an expensive payday loan or a hardship withdrawal from the 401 (k) plan,” said Shawn Leavitt, a Comcast executive who oversees employee benefits.

So-called financial welfare benefits have become increasingly common in corporate benefit programs, but until recently they focused primarily on educating older workers as they prepare for the job. retirement – consider seminars on 401 (k) investment options. Now they are expanding to include services that help workers avoid the costly consequences of cash flow problems: bank overdraft fees, late fees, and high interest loans.

The benefits don’t come at a high cost to employers, and they can substitute for something workers would prefer – real increases, which are still scarce despite record unemployment rates.

Employee Loan Solutions’ loan program, called TrueConnect, is already offered by nearly 1,000 employers, many of which are government agencies, but company co-founder Doug Farry said Comcast was the largest employer. nowadays. And as Brightside looks to expand and offer employee benefit services to more large companies, the loans may soon be available to many more workers across the country.

“I think Comcast will take the plunge on this is going to lead to a lot greater awareness,” Farry said.

There is no doubt that there is a strong consumer demand for short term loans. While the volume of payday loans has declined slightly in recent years, Californians have taken out an increasing number of expensive consumer loans. Last year, Californians borrowed more than $ 1.1 billion in larger installment loans with interest rates of 100% or more, more than double the $ 388 million borrowed in 2012.

Installment loans are typically made for at least $ 2,500 and are structured to be repaid over a year or more, resulting in borrowers have to repay the loan amount several times.

Farry said some employers just didn’t realize their employees were among those who borrow at such high interest rates, but it becomes evident once an employer starts offering TrueConnect.

Between 10% and 20% of workers take out loans, often to pay off more expensive types of debt, he said.

Doug Farry is co-founder of Employee Loan Solutions. The company connects workers with 24.9% APR loans that are repaid through automatic payroll deductions.

(Misael Virgen / Union-Tribune de San Diego)

Other companies also work with employers to provide similar services.

In December, Walmart, the country’s largest private employer, announced an agreement with San Jose startup PayActiv that allows employees to be paid instantly, up to eight times a year, for the hours they have already worked instead of having to wait for payday.

At the time, Jacqui Canney, director of human resources at Walmart, said the service would help “provide more stability” to workers and “allow them to be all they can be when they are at work. work in the service of our customers “.

PayActiv chief executive Safwan Shah said the deal put his business on the map and helped it secure more business customers. Last week, PayActiv announced that its service will now be available to more than 600,000 employers who work with payroll giant ADP.

“Before Walmart, we knocked on doors for five years,” he said. “People were like, ‘Good idea, but who else is using it? We would say, “A small business in Trenton or a hospital in Baton Rouge.” Walmart is a different dynamic.

Shah said his agreements with ADP and ADP and Employee Loan Solutions’ partnership with Brightside show employers increasingly accept that the best way to help struggling employees is not to lecture them on budgeting or saving, but to offer them services that solve immediate problems.

“If someone is hungry, do you give them a diet book or a meal? ” he said. “At some point you have to do something real. “

About 48% of employers now offer financial advice as a benefit, up from 28% in 2014, according to the latest annual survey from the Society for Human Resource Management.

But much of this financial advice is still aimed at helping workers save for retirement or ensuring their investment portfolios are structured appropriately. It’s not useful for workers who live paycheck to paycheck, Farry said.

“What about frontline workers who don’t plan in 30 years? ” he said. “What about those who are trying to plan for next Tuesday?” “

Only 17% of employers offer payday advances, roughly the same percentage as in 2014, and only 15% offer emergency loans, up from 12%, according to the company’s survey, conducted earlier this year. .

(Julian H. Lange / Los Angeles Times)

Of course, one way to help improve workers’ finances would simply be to pay more for them, which employers have seemed reluctant to do.

Last week, the Labor Department reported that wages rose 2.7% for the 12 months ending July 31, but the Consumer Price Index was up 2.9% for the 12 month ending June 30, which means that Americans’ purchasing power declined during this period. .

Recent wage growth also remains slower than it was before the recession. From 1983 to 2007, median wages increased at an average annual rate of 4.6%, according to the Federal Reserve Bank of Atlanta.

“I think these financial welfare benefits seem quite fancy and of questionable value to workers, and more like employers who wish to continue not to offer wage increases to attract workers,” said Josh Bivens, research director at the Economic Policy Institute, a Washington think tank. that stands up for low-income workers.

Indeed, providing financial welfare benefits is relatively inexpensive for employers. As a stand-alone offering, TrueConnect doesn’t cost employers a dime. Brightside and other benefits “platforms” that offer services from many providers can charge as little as $ 50 per year per employee.

But Christine Tozzi, chief strategy officer for Brightside, said workers get more in return than their employers pay.

She declined to reveal how much Brightside charges employers, but said the company is negotiating group discounts and lower rates for workers. And because Brightside is paid by employers, not the outside financial services companies it works with, Tozzi said the company can offer unbiased advice.

“We are looking for savings for people,” she said. “We are finding multiples of our costs for people. It’s better than cash compensation.

If someone is hungry, do you give them a diet book or a meal? At some point you have to do something real.

Safwan Shah, PayActiv

Rob Reiskytl, a partner at Aon, said the insurance and benefits consulting firm’s survey released last month indicates attitudes are changing.

The survey of 150 multinational companies found that the benefits of financial well-being are likely to become much more common. Only 14% of employers said they already have a strategy to help employees improve their financial well-being, but 62% said they will do so in the next three years.

Yet while over 70% of employers who responded believe they have a responsibility to help employees save for retirement and pay for health care, less than 15% think employers should pay for benefits. programs that help workers cope with everyday emergencies and manage their debt.

But Reiskytl maintains that employers are starting to recognize that their employees’ ability to save for retirement is affected by housing costs, student debt, and even basic budgeting skills.

Services such as PayActiv and TrueConnect, along with benefits such as student debt assistance, show that some companies are taking a more active role in these areas by listening to the concerns of their employees, he said. .

“If you have a pension plan, some employees will say, ‘Fine. But if you have student loans, you say to yourself, “I can’t save for retirement, I have to pay this off first,” Reiskytl said. “Employers may not have been sensitive enough to these needs. “

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