Miami-Dade Schools, union push costly private loan program for lowest paid workers

By William Gjebre, FloridaBulldog.org 

Terry Haynes, senior vice president of Local 1184 of the American Federation of State, County and Municipal Employees

A union representing the lowest-paid Miami-Dade Public Schools employees has endorsed a proposed private loan program for its members that would charge 24 percent interest with the school district collecting loan repayments by deducting them from employee paychecks.

The proposal, which did not go before the Miami-Dade School Board for public discussion and approval or review, has drawn criticism from an outspoken union official who will seek to become president of the American Federation of State, County and Municipal Employees, Local 1184, in a May election.

“The interest rate is high” for the union employees and “puts them in harm’s way,” said controversial Local 1184 Senior Vice President Terry Haynes. Haynes was suspended by the loca’s executive board last month but reinstated March 28 by AFSCME’s national headquarters in Washington, D.C. following an investigation.

Critical of the union and the school district for backing a contract change that allows for a private company to set up the loan program, Haynes said, “If they want to do something, why not something more manageable” than 24 percent interest? “If we have people going out for those loans,” he said, “it means they are not being paid enough.”

The loan program proposal arises from a modification to the labor contract that was agreed to by the school district and the union Jan. 31. The change allows for the union to have another payroll deduction slot for “other economic services” to be used by “entities or businesses” as designated, with the school district being held harmless under the plan.

Vicki Hall, Local 1184 president who signed the agreement on behalf of the union, Hall did not respond to requests for comment, including a question about what benefits the union might receive for backing the BMG loan program. Union draft documents about the program, however, state that BMG would provide financial literacy training to union workers; support union membership drives and make an unspecified contribution to the union.

But Tom McCormick, chief growth officer for BMG Money Inc., said in an email, “We do not plan on offering any incentives to AFSCME based on any milestones.”

Two school district officials — Vivian Santiesteban-Pardo, assistant superintendent in charge of Labor Relations and Compensation, and Jose Dotres, Chief Human Resources Officer, who signed the “Memorandum of Understanding” on behalf of the district – also failed to return calls for comment.

A new payroll slot

But in a district email response, Santiesteban-Pardo said that in September the union had requested the payroll department to “add a payroll slot for Loans at Work, a program offered through BMG Money… The Union has not presented the District with the agreement in order to begin the program. The terms and conditions of the program are subject to the agreement between BMG and AFSCME. At this time, no other union in M-DCPS has requested a payroll slot for BMG Money.”

A draft letter from AFSCME Local 1184 backing the BMG loan program states: “Sometimes when savings aren’t available and neither banks nor credit unions can help, these expenses can create true financial hardships in our lives…

“Though the interest rate is somewhat higher than what our more fortunate members might pay, 23.99%, it is definitely reasonable in comparison to payday loans that charge anywhere from 200%-400% APR… The availability of the [BMG] LoansAtWork program is in the best interest of our members – another tool in times of need.”

Haynes, however, said there is something wrong when only the lowest-paid employees are being offered the loan program at what he considers a high rate. The union should not be a party to this, he said, adding he told Hall it was not good for union employees.

The school district will, in effect, become a “collection agency” because loan repayments will be made through the district’s payroll deduction system, said Haynes.

BMG’s McCormick declined to comment on any talks with the district and Local 1184, but did discuss his company’s program.

“BMG Money’s LoansAtWork program is a fixed-rate, fixed-payment employee emergency loan program,” McCormick stated. “When facing an expected expense, too many good people with good jobs are left with few options except predatory payday lenders… Payday lenders in Florida offer short-term loans with absurdly high interest rates of 265% and repayment terms that make the loans exceedingly burdensome on borrowers.”

But a Tallahassee-based consumer group that strongly opposes predatory payday lending says BMG’s 23.99 percent interest, while considerably lower, is no bargain, either.

“I would say it is a pretty high interest rate,” said Alice Vickers, director of the Florida Alliance for Consumer Protection. “I certainly would call it not very risky [for BMG] with an interest rate that high and guaranteed repayment through paycheck deduction…I advocate they lower the rate.”

BMG Money

BMG Money Inc., incorporated in September 2009 in Delaware, began operations in Florida in 2010 and has an office on Brickell Avenue. The company’s majority shareholder is an affiliate of Banco BMG S.A. of Sao Paulo, Brazil, according to bid documents it presented to Broward County government, where the company is under consideration for establishment of a loan program for county employees.

Banco BMG S.A., according to Bloomberg Private Business Information, “provides commercial and credit, financing, and investment products and services primarily in Brazil.” It also provides “salary account deductible loans … personal direct debit loan accounts for civil servants, retirees … and pensioners,” according to Bloomberg.

In its short time in Florida, BMG has been busy. In its documents to Broward County government, BMG stated it has 42 governmental or public entity clients, all in Florida, and has issued “over $107 million of loans to employees who otherwise would have fallen victim to predatory payday loans.”

Among the 42 clients are Broward County Public Schools and the cities of Fort Lauderdale and Miami Beach. The loan programs with these other government agencies were offered to all employees working for those agencies after being reviewed and or authorized by the governing bodies.

BMG’s bid documents to Broward County give a glimpse of how the loan program operates: Loans do not compound, do not require credit reports, do not require fees, will be “unsecured” (not require the backing of homes, cars or savings as collateral), will be in amounts from $500 to $5,000, will be repaid through payroll deductions over six to 24 months, and can be paid back early without penalty. BMG also provides financial literacy training for borrowers.

The controversy involving the loan program is another sharp difference between Haynes and Hall. Led by Hall, Local 1184’s executive board on March 7 suspended Haynes from his duties as Senior Vice President, but on March 28 he was reinstated by AFSCME’s headquarters after an investigation.

Haynes said he was told by Hall that he was suspended for talking to a reporter for the FloridaBulldog. In an article appearing one day before his March 7 suspension, Haynes questioned why Hall received a huge annual pay hike from the school district two months before the School Board began approval of two contracts totaling $1.8 million, over a five-year period, to outsource lawn service normally done by union employees. Haynes linked the pay boost to the two contracts that the union failed to challenge at the time of School Board approvals.

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