Loans are an unfortunate pillar of the modern American economy. From the ever-increasing price of higher education, to bankrupting medical bills, to the high cost of starting a business, many citizens find themselves awash in debt at some point in their lives.
This flood of debt is especially common in poor and underserved communities. However, many of the loans these people take are not from banks or credit unions, as is more likely the case in middle- and upper-class neighborhoods. Low-income people are often denied loans by these institutions due to bad or non-existent credit. Instead, these communities find themselves the primary target of payday lenders or similar predatory businesses that can drive them deeper and deeper into debt, desperation and misery.
Zirtue co-founder and CEO Dennis Cail understands all too well the grim reality facing the poor in this country. After all, he grew up in it. As he recounts, “My dad and my uncles had to cash their checks at the liquor store, and [the liquor store] would still take 30% of his check…even at seven years old, I knew that was a miscalculation.
When he joined the army, this reality followed: “I was in the navy for four years, but when I left boot camp, walked outside the naval base , there were all these pawn shops, these “buy here, pay here” car lots, these rental furniture stores with these high interest rates, and it hit me at that moment. These predatory lenders target every demographic I have been in, namely: low-income, minority, and military veterans.”
An alternative to banks and predatory lenders Is there are, however: loans from friends and family members. Friends and family are also among the biggest lenders in the United States, according to a survey by Searcher suggesting that Americans are borrowing nearly $300 billion a year as of 2018. However, part of the problem with borrowing from loved ones is the strain it causes. Missed loan repayments can turn into broken relationships. Loan denials from friends and family can cause similar pain and tension, as those in need are denied help from those they trust.
Cail’s own experiences with lending to loved ones, as well as his experiences watching predatory moneylenders prey on the people around him, led to the founding of Zirtue. Beginning development in 2018, Zirtue is a relationship-based lending and bill-paying platform that launched in late 2021. According to the company, more than $40 million in loans have already been processed through its app. For business bill payments, the company counts AT&T, Toyota, and the University of Texas Southwestern Medical Center among its partners. Morgan Stanley, Google for Startups, Northwestern Mutual and Revolution Ventures are among the companies that have invested in the company. Thanks to his work with Zirtue, Cail was also one of the 2021 Forbes Next 1000 winners.
It was with Cail’s experiences in mind that Zirtue implemented measures to prevent predatory lenders from finding another breeding ground on the platform. One of its primary ways of doing this is through its interest rates. In Cail’s words, “If a lender lends money to a friend or family member, they have two options when charging interest rates. They can charge a 0% interest rate or a 5% interest rate. The first option is the most popular with Zirtue users. According to Cail, “Over 70% of our lenders choose the 0% interest rate because they are trying to provide a financial lifeline.”
As of this writing, Zirtue only allows users to use debit cards and ACH bank transfers. However, they plan to introduce additional methods in the future, including through a Zirtue credit card or bank account.
During the interview with Cail, he also confirmed that the company will implement cryptocurrency transactions, after receiving user feedback on this. It remains to be seen whether these plans will materialize following the current crypto market crash as of this writing.
For Cail, Zirtue is an attempt to remove some of the stigma and apprehension that borrowers and lenders might feel about going through the loan process with a loved one, as well as keeping the money. within the community instead of going to a predatory bank or lender. . It’s Cail’s way of, in his own words, “paying it forward”. It is also a means of combating the economic disparities that he, in an article written for VentureBeat in 2020, said “are at the heart of the public and private racism that ends up bleeding in the streets.”
When asked to expand on the quote above, Cail said, “What I mean by that is that a lot of the social or racial issues that we see have more to do with socio-economic issues. , disparities and gaps. If you look at the wealth gap, the education gap, those are things that I think feed into how people are treated by public services, how people access capital and credit that d Other communities seem to have plenty… We know what the problem is, and we know exactly where the problem lies. We simply choose to look away.
Whether or not Zirtue can help solve the problems these communities face remains to be seen. No simple or single solution is available to address the systemic inequality faced by people of color in the United States. Cail himself recognizes this and tries to use his experience and connections to help people of color in the business world as well. His article for VentureBeat was primarily aimed at connecting venture capitalists with black entrepreneurs and founders who need the kind of funds that VCs can provide.
So while it’s still up in the air whether the fledgling app can become an agent of positive economic change in communities in need, with the vision of people like Cail guiding the platform’s policies, its heart certainly seems to be at good place.