Hourly Marriott workers in Philadelphia are in the midst of a lawsuit against the Marriott Employees Federal Credit Union, saying the credit union’s $500 mini-loans are predatory and lack transparency on their true cost.

The suit was filed on behalf of housekeeper Katherine Payne and busser Arthur Coates, both of whom work at the Philadelphia Marriott Downtown in Center City, but seeks to include all Pennsylvania workers that have used the mini-loans. Payne and Coates are part of a group of workers at the Marriott Downtown seeking to unionize with Unite Here.

“By providing employees with quick cash when needed and indebting them to their employer, the mini-loan allows the Marriott to retain its workforce even while subjecting workers to unfair and unpredictable scheduling,” the lawsuit reads.

As of September 2018, the lawsuit says, credit union had assets worth about $192 million, and nearly 32,500 members nationwide — including 500 in the local district. The credit union mini-loans are offered through Marriott’s local human resources offices.

To be eligible for the mini-loan, workers must agree to a direct deposit of a minimum of $33 weekly from their wages to their credit union account before the loan is granted. An additional $10 per pay week is held from the paycheck, which goes into an account that the credit union keeps as collateral security until the loan is paid off, according to the lawsuit.

It’s a case that ties together two major topics facing workers.

Unpredictable scheduling

Payne, who lives in East Oak Lane and has worked at the Marriott for eight years, and Coates, who lives in North Philly, turned to the mini-loans when their hours were cut, the lawsuit says. It’s a scheduling problem that causes them to make less money, even if their hourly rates are higher than the $15/hour that advocates are fighting for around the country.

Lekesha Wheelings, a chef at the Philadelphia Marriott Downtown who has also used the loans, made $39,500 in 2017, down from nearly $45,000 in 2016.

Retail workers and fast-food workers also face inconsistent scheduling issues: It’s why advocates fought for the Fair Workweek law that mandates more predictable hours and will be implemented in 2020. Philly’s Fair Workweek law is the only city law of its kind that also covers hotel workers. (Oregon’s state law also covers hotel workers.)

‘The $1,000 problem’

A majority of Americans would have trouble coming up with $1,000 to cover an emergency, a phenomenon some experts have dubbed “the $1,000 problem." It was an issue that was front and center just last month when Transportation Security Administration agents and other federal workers were forced to turn to food pantries and loans when they missed a paycheck during the government shutdown.

Researchers like Carmen Rojas of the Workers Lab and Rachel Schneider, author of The Financial Diaries: How American Families Cope in a World of Uncertainty, have advocated for new kinds of employee benefits that address problems that “show up earlier than retirement and more regularly than major health-care emergencies," they said. And those benefits have started emerging, often with corporations championing them as payday loan alternatives: Walmart employees can now use an app to access their pay earlier, often with no fees. Comcast employees can take out $1,000 to $2,000 loans and pay it back through payroll deductions.

Still, some are skeptical about programs that get workers their money faster: When the Huffington Post offered a freelancer quicker payment for an 8 percent cut, he balked, describing it as another form of a payday loan.

Regarding the Marriott credit union mini-loans and the Huffington Post payment situation, Betsy Edasery, program director at the Workers Lab, said they’re both examples of “employers continuing to place the burden on working people to solve failures of our economy — persistent low wages, unstable scheduling, zero benefits.”

The Workers Lab, based in Oakland, Calif., is excited about solutions that “are actually trying to solve these issues by changing their business model by paying workers more and offering no-cost cash advances or grants,” she said.

There’s nothing inherently problematic with an employer offering benefits to tackle cash-flow problems, said Rebecca Borné, senior policy counsel for the nonprofit Center for Responsible Lending based, in Durham, N.C, but what is concerning about the Marriott situation is how the credit union’s $35 overdraft fees can interact with the mini-loans to keep workers in a cycle of debt. Wheelings, for example, got hit with $450 worth of overdraft fees in 2014 while she was paying back a mini-loan.

The credit union did not respond to a request for comment. Marriott did not have any comment on the suit but said the credit union is continuing to assess its products and services, in accordance with the hotel company’s request.

Mediation is scheduled for May, during which both parties could come to a settlement, said Phillip Robinson of the Maryland Consumer Law Center, who’s representing the Marriott employees. If the case does not get settled through a settlement or judgment, Robinson said, a ruling could be expected by the end of the year.