R9I-Discuss- Agreement For Voluntary Employee Loan ProgramCity of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Matti Herrera Bower and Members ofthe City Commission
FROM: Jorge M. Gonzalez, City Manager
DATE: December 14, 2011
SUBJECT: A DISCUSSION REGARING TION OF THE CITY
ADMINISTRATION TO ENTER INTO AN AGREEMENT FOR A
VOLUNTARY EMPLOYEE LOAN PROGRAM, FOR A ONE (1) YEAR
TRIAL BASIS, THROUGH BMG MONEY LOANS-AT-WORK PROGRAM
TO MAKE AVAILABLE LOANS TO INTERESTED ACTIVE CITY OF MIAMI
BEACH EMPLOYEES, COMMENCING ON JANUARY 1, 2012.
BACKGROUND
This item was originally referred to and discussed at the June 23, 2011 Finance and
Citywide Projects Committee (FCWPC) meeting. At that time, the FCWPC opted not to
move forward with offering this payroll deduction loan program to City employees.
Subsequently, the FCWPC Chair asked that this item be placed on the October 27, 2011,
FCWPC agenda for further consideration and discussion.
BMG Money offers all active full-time employees voluntary employee emergency loans
through a program called Loans-At-Work. This program provides employees the opportunity
to obtain the credit they may need to cover unexpected or emergency expenses. ·
Specifically, the BMG Money Loans-At-Work program provides employees who have little or
no credit the ability to receive small, unsecured loans for emergencies, such as medical bills,
home and vehicle repair, or any other emergency. These loans are based on the
employee's take home pay and their ability to repay. If the employee meets the loan
qualifications, the funds are distributed directly to the employee and the employer is notified
of the new loan and the need to begin payroll deductions for repayment of the loan. Should
BMG Money Loans-At-Work deny the loan, the employee is provided credit counseling to
determine their actual loan needs, if any, and to educate them on the proper use of credit.
Should the employee default on the loan as they had either cancelled their payroll
contribution or left the employment of the City, BMG Money would be responsible to collect
any outstanding loan balance directly from the employee. The City would not have any
responsibility at all in collecting any delinquent loan balances nor would the City be held
liable in any way.
The City currently has one option for City employees who may need an emergency loan that
can then be paid off through payroll deductions. This option however is only available for
those employees who may have a voluntary deferred compensation account through either
ICMA-RC or Nationwide (the City's vendors who provide voluntary supplemental retirement
accounts to our employees). In addition, City employees who are members of the Dade
County Federal Credit Union are able to apply for loans which are then paid off through
payroll deductions (although these loans tend not to be emergency loans but, rather, auto
loans, home equity loans, mortgages, etc.).
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Agenda ltem_~R-!..9 I=--
Date---'-'[2::::;..-....;...1 4..:...-_11_
City Commission Meeting
December 14, 2011
BMG Money Loans-At-Work Loan Program
Page 2 of 3
The Loans-At-Work program is a direct-to-consumer loan, designed for employees who do
not have access to traditional credit options, such as banks, credit unions, credit cards,
deferred compensation and/or retirement accounts. These loans are unsecured and based
on the following: (1) employee's employment; (2) employee's bi-weekly net take-home pay;
and (3) the ability for the employee to repay the loan. Although the program does not verify
the employee's credit, it does however provide the opportunity to build good credit, as the
loans are reported to the credit reporting agencies when paid off. If the employee separates
from City employment, that employee is fully responsible for the full repayment of the loan
with the City bearing no responsibility or liability at all for the repayment or collection of the
outstanding loan.
A copy of the BMG Money Loans-At-Work program description is attached (Attachment A).
BMG Money would provide City employees with financial management educational seminars
to assist them with managing their money and increasing their credit rating. These seminars
would be provided to the City at no cost and through BMG's partnership with the United
Way.
ANALYSIS
Through the BMG Money Loans-At-Work program, an employee:
• May borrow up to 20% of their net take-home pay (minimum of $500 to a maximum of
$5,000) with interest computed daily and based on the amount of the loan (interest
ranges from 23.75% to 29.75%);
• Pays a $25 loan application fee (per loan);
• Selects their repayment period, at either 6, 12, 18 or 24 months (for this trial period with
the City of Miami Beach, the repayment period will be limited to a maximum of twelve
(12) months which will also reduce the employee's borrowing maximum); and
• Can pre-pay the outstanding loan amount at any time without penalty.
If the City were to offer this program, the Human Resources Department would need to
provide BMG a data file of active City employees, including the name, address and salary of
the employees; create the appropriate payroll deduction code in EDEN (the City's payroll
system) for any approved loans; and collect and wire the bi-weekly payroll loan payments to
BMG Money. At present, the City would incur the current Sun Trust Bank wire fee of $5 for
each wire sent. However, should there be an interest in this program, BMG Money has
agreed to pay the cost of the wire transfer. This program can be made available to
employees at any time, requiring only a 30 day set-up period.
Currently three (3) other municipalities in Miami-Dade County (Cities of Sweetwater, Doral
and Hialeah Gardens) offer their employees the BMG Loans-At-Work program. In addition,
BMG has advised us that a number of other cities in Miami Dade County, including Hialeah,
Surfside and Bay Harbor Island are currently considering offering this program as well as the
United Way of Miami-Dade and Our Kids of Miami-Dade and Monroe Counties.
FCWPC MEETING DISCUSSION
The item was discussed at the October 27, 2011, FCWPC meeting. The Committee
members asked if there was there an option to negotiate the rates with BMG Money to
something lower than the 23.75% to 29.75% rate currently charged. BMG Money indicated
502
City Commission Meeting
December 14, 2011
BMG Money Loans-At-Work Loan Program
Page 3 of 3
the rates charged were already lower than those charged for short term loans at other
providers and they would not be able to provide the service at a lower rate.
The FCWPC members asked that this item be discussed at the next City Commission
meeting, with the recommendation that if the program was approved, it would be for a trial
period of twelve (12) months beginning January 1, 2012.
CONCLUSION
This program provides a voluntary payroll deduction loan program to employees through a
non-traditional, unsecured loan to cover unexpected financial emergencies, with repayment
provided through payroll deduction. This program would be an option for employees who
have no credit and are unable to secure emergency funds through traditional financial
outlets. The City would not bear any responsibility or liability this program. There is a current
wire transfer fee that would be paid by the City for each loan that BMG Money has agreed to
pay.
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ATTACHMENT A
BMG Money
Loans at Work
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*Other terms a.nd.conditions mi.y apply. Not all applicant!! wHI qualify for a loan.
·Employee's Employee : Loan to.~e paid in . Employer deducts. .Employee's net
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salary: . ·~·for a loan: .
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; 24 ·installments of $265 every month salary will be-
: $265 everiv month._ from employee's ._ $2,735 (including
(APR of 24.29%). · paycheck until the deduction)
loan is settled. for 24 months.
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