Lenders Rely on Faith in Humanity

Interest rates on the rise? Not at a Los Angeles lending institution that has managed to keep its rate the same for 100 years.

The cost of borrowing cash from the Jewish Free Loan Assn. is always 0%.

All that association leaders ask is that clients, who can borrow up to $20,000 at a time, promise to pay the money back.

Interestingly, the default rate hovers around 0%, too.

“We have more than 99.5% repayment,” said Mark M. Meltzer. “You can compare that with a 15% default rate in the banking world.”

Meltzer heads the nonprofit, nonsectarian agency that for a century has loaned cash to those that banks often turn away: people whose assets are limited, but whose needs are urgent.

More than 300,000 people have received loans since 10 merchants gathered Jan. 17, 1904, on downtown’s Olive Street and pitched in $500 to create the fund.

In those days, up to $25 could be borrowed interest-free for reasons such as unexpected medical bills, to stave off a home’s foreclosure, or to buy a pushcart or sewing machine to start a new business.

These days, loans of up to $20,000 are available.

The loan association’s almost nonexistent default rate is due in part to the personal relationship that the association’s 11 employees have with borrowers.

Those few who fall behind in their payments get gentle reminders.

“I’ll occasionally hear sweet Allison Oxley out at the front desk on the phone with someone saying, ‘Did you forget us?’ It’s done with a human touch,” said Meltzer, who has been with the association for 24 years.

“Some of our clients have credit glitches or are welfare or Social Security recipients. Some are students who can’t qualify for a loan, or people with emergency cash needs that are too small for a bank -- as little as $25 to $100 for emergency food,” Meltzer said.

Many are seeking thousands of dollars to start a business. And some of them do a lot with their loan.

Russian immigrant Svyatoslav Rafailov opened a produce market with $20,000 the association lent him six years ago.

“We were able to get off welfare,” said Rafailov, 46. “They understood that we wanted to try to make a business and break away from welfare. I told them that business was going to be all right and I’d bring back the money. They understood.”

Rafailov and his brother, Sergey, had been selling fresh fruit and vegetables from a pair of vans in Hollywood. After five years of street vending, they figured they knew the neighborhood’s tastes.

So they weren’t surprised when business boomed after they opened their Shalom Produce shop at 7222 W. Sunset Blvd.

Rafailov easily made his interest-free, $150-a-month payments. After a year and a half, he volunteered to increase the amount.

“We told them we could pay it back even faster. They said, ‘Don’t worry about that -- if you can give us more, fine.’ But we wanted to pay it back as soon as we could so they could use the money to help someone else.”

Today, the brothers have paid off the loan and gone on to open a takeout-food kitchen next door and a second produce shop called Tashkent Grocery in Valley Village.

“We began from almost zero. We had problems because we didn’t come from rich relatives,” Rafailov said. “I’m glad I’m here. I appreciate this country so much.”

West Los Angeles optical store owner Lev Zabarsky agrees. He launched his Euroglasses shop at 8358 W. 3rd St. about three years ago with $15,000 from the Jewish Free Loan Assn.

Trained as an optician in Moscow, Zabarsky, 57, had worked for a large optical chain in San Francisco before starting his own business here.

“It required a substantial investment for frames and equipment and to remodel this place. They have given me enormous help,” he said.

His loan will be paid off in another year, Zabarsky said. Once, when he couldn’t make one of his $400-a-month installments, “I let them know and they said, ‘Thanks for calling -- you’ll make it next time.’ I did. I’m honest and proud, and I pay my bills.”

So does virtually everybody on the association’s current roster of 3,100 clients. Some, such as the elderly or those who are ill, may send in only $10 per month. But they pay.

“We’ll reduce the payment amount if their situation changes,” said Evelyn Schecter, the association’s chief operating officer.

“We get notes coming in saying, ‘This is my final payment. I’m so glad you were here. You were my last resort.’ We get all kinds of blessings in all kinds of religions. It’s really coming from the heart. These are notes from people who don’t write very much.”

Four out of every 10 loans are made to non-Jewish clients, she said. The average loan is for about $2,000 -- enough to repair a car or cover something such as emergency dental work. About 1,500 new loans are issued each year.

The loans are funded by $5 million in principal held by the agency. Yearly contributions by the Jewish Federation of Los Angeles and the United Way cover association operations.

The association has never charged interest, but has constantly grappled with inflation. To mark its 100th anniversary, supporters of the agency are trying to boost the principal by $2 million. That’s because “a $1,500 or $2,000 loan won’t be enough to cover a person’s emergency in a few years,” as Meltzer puts it.

A grateful recipient of one of the early interest-free loans donated $50,000 to the fund in 1925. By 1980, the principal had grown to $1 million.

Through it all, association leaders say they’ve never turned down an application because they didn’t have money to loan out.

Their interest is in keeping it that way.