making a difference

Transcription

making a difference

MAKING A DIFFERENCE
Credit Unions Reaching Out to
Members of Modest Means
Credit Union Executives Society
with a grant from
The Ford Foundation
MAKING A DIFFERENCE: CREDIT UNIONS REACHING OUT TO MEMBERS OF MODEST MEANS
The information in this report is accurate as of the time
of publication and consistent with standards of good
practice in the general credit union and publishing
community. However, as research and practices
advance, standards may change. We recommend
that readers evaluate the applicability of any recommendations to their particular situation and in light of
changing standards.
The views presented in this report are those of the
author. They do not necessarily represent CUES’ views.
Credit Union Executives Society (CUES)
5510 Research Park Drive
Madison, WI 53711
Toll-free: 800.252.2664
The Credit Union Executives Society is a Madison,
E-mail: [email protected]
Wisconsin-based independent membership association
cues.org
for credit union executives worldwide. Its mission is to
advance the professional development of credit union
Fred Johnson, President/CEO
CEOs, senior management and directors.
George Hofheimer, VP/chief learning officer
Cynthia Robey-Duncomb, product coordinator
Bryan Ochalla, editor
Jim Nicodemus, art director
Dick Radtke, freelance author
Interior design by Lorraine Ortner-Blake, freelance
graphic artist
Copyright © 2005. All rights reserved.
Printed in the United States of America
ISBN: 1–933081–04–X
ii
Contents
About This Volume
P A R T
v
1
The Need
1
Why Reach Out to Low-income Consumers?
1
Barriers to Effective Outreach
6
P A R T
2
Effective Credit Union Outreach
to Underserved Populations
9
Minority Outreach:
SCE Federal Credit Union, Irwindale, Calif.
10
Multiple Partnerships:
SSA Baltimore FCU, Baltimore, Md.
16
Social Entrepreneurship:
Vancouver City Savings Credit Union,
Vancouver, B.C.
20
A CUSO Model:
Credit Unions of El Paso, Tex.
25
Mainstream/CDCU Partnership:
Boeing ECU/Washington State ECU, Wash.
29
P A R T
3
Common Elements of Success 32
P A R T
4
Further Resources Available
iii
36
iv
years. This organization was one of the first federal
About This Volume
credit unions to apply for and receive an underserved community field of membership designation
from the NCUA and now has four branches in four
A compelling case can be made for mainstream
communities. You’ll also see how a mainstream
credit unions to address the needs of consumers of
credit union in Baltimore joined forces with
modest means, from both a philosophical and a self-
Operation ReachOut Southwest, a coalition of
interest point of view. Credit union executives, direc-
churches and neighborhood organizations, and A&B
tors and staff should remember the basic tenets of
Check Cashing, Maryland’s leading check-cashing
credit unions and cooperative principles. Outreach
company, to open Our Money Place, a one-stop
programs focused on the most vulnerable segments
shop for financial services.
of our society demonstrate the social role of credit
A third outreach model shows how a credit union
unions and their uniqueness in the financial services
that is widely regarded as a leader in all forms of
community. If the credit union is perceived by its
corporate social responsibility regards these activities
community as the instrument that helps resolve a
as inextricably linked to its corporate identity. For this
public problem, a fortune in goodwill is built on
Canadian credit union, serving disadvantaged
behalf of the credit union.
communities, being environmentally sound and
The services a credit union provides to its members
being ethical in its corporate decision making is part
are important components of the overall social
of its DNA. This credit union’s social conscience has
fabric, because those services help members,
helped differentiate it from other financial providers,
employer sponsors, local, public and private
a goal to which U.S. credit unions also aspire.
agencies and the community as a whole. When
public bodies ask a credit union what they are doing
to improve consumers’ lives, credit unions with
For the purpose of this publication,
outreach programs in place can provide a positive
a mainstream credit union is defined as a credit union
which provides a range of traditional financial
and constructive answer. By engaging in outreach
services to mainstream consumers (i.e., middle to
programs to benefit people of modest means, credit
upper income) and is not specifically in business to
unions can live up to their historical mandate, and
serve the needs of low income communities.
demonstrate to opinion leaders that they really are a
different kind of financial institution.
In the pages that follow, you will find vignettes featuring
mainstream credit unions that have programs in place
Next, you will see how a CUSO model, and the
to serve low- and moderate-income families. We
pooling of resources with other local credit unions,
have endeavored to present a wide range of
can be used to solve a social and business problem.
possible approaches, from which credit unions can
In El Paso, Texas, several credit unions use a CUSO to
choose the model that might be most appropriate
address affordable housing issues in their communities.
for their particular community and circumstances.
Finally, we look at a credit union formed specifically
You’ll learn about one credit union that has worked
to serve low-income individuals. The first new credit
closely with the low-income and generally under-
union in the state of Washington in nearly ten years,
served Hispanic community in Los Angeles for several
it was made possible by a partnership between two
v
large mainstream institutions. This story provides a
roadmap for success in working with others to serve
individuals of modest means.
Through this spectrum of diverse vignettes, we hope
to begin a discussion of how credit unions across
America can address the issues of financial success
for households of modest means in their own
communities. The opportunity is enormous for lowincome communities, the credit union movement
and society as a whole. By addressing the needs of
those at most risk within their communities, credit
unions can maintain their place in our society as
member-owned financial cooperatives.
To learn how your credit union can participate in this
exemplary undertaking, please read on.
vi
PART 1
THE NEED
Why reach out to low-income consumers?
Lack of Financial Service Providers
Millions of Americans are shut out of services from mainstream
financial institutions as a result of low assets or income and lack of
adequate knowledge of money management principles. These
individuals are more likely to rent their homes, to be racial or ethnic
minorities, to be young, and to possess limited assets and educational
attainment. In most cases, they have almost no month-to-month
financial savings, and frequently have impaired credit histories.
For the nearly 10 million American families without a relationship with
a financial institution—most of them young, minorities with lower
incomes—navigating the financial system can be perilous.
For the nearly 10 million American families
without a relationship with a financial institution—
most of them young, minorities with lower incomes—
navigating the financial system
can be perilous.
Minimum balance requirements and high fees for bounced
checks make even rudimentary accounts too expensive for many
families. Also, banks rarely offer the services poor people need—
from money orders to photocopies. It is little wonder that many of
the “unbanked” turn to businesses that will cash their paychecks,
offer short-term loans to carry them from payday to payday and
transmit money to relatives living outside the United States.
Credit unions are in an excellent position to reach out to these
people and fulfill their traditional mission of providing financial services
to people of modest means.
Breaking the Cycle of Poverty
and Despair
Credit unions are in a position to encourage low- and moderateincome members to be “champions of change.” These individuals
often face life crises and change, and need help to deal with those
changes. Credit union counseling and service programs can examine
living costs in areas such as transportation, housing, insurance,
children’s education and funding and tax management. On the asset
side, credit unions can make recommendations relative to investments, estate distribution, home-based businesses and other categories.
1
Fulfilling Credit Union
Philosophy
Members participating in credit union educational
programs typically report “a great release from
financial stress.” Financial help means less family
stress and fewer health disorders, yielding more work
Credit unions were founded to help people of
success and productivity. Members also report
modest means improve their financial lives. By
“fewer problems off the job, and fewer problems on
offering services to underserved populations, credit
the job.”
unions can demonstrate in action what they profess
in principle. By coupling savings, lending and trans-
Members in underserved populations typically
action services with education programs, credit
expect more from education programs than simple
unions can reduce the risk of costly loans and
credit repair. They want to manage their money
ineffective use of the organizational resources. An
better for greater future security. And they want to
education program also promotes the use of more
become financially independent, rather than contin-
credit union products and services by members.
uing to be virtual bonded servants who owe their
souls to the company store. These are tangible
Member education programs are a positive alterna-
benefits that financial education can deliver.
tive to traditional collection methods, creating value
added services that help members maintain their
With the help of credit union programs targeting
financial health and build their long-term assets.
underserved and at-risk households, individuals and
Society increasingly is asking its financial institutions
families have someone to turn to rather than moving
to fulfill a new responsibility, to not only provide its
along life’s highway adding more debt and disre-
citizens services, but to educate them on how to
pair. With credit union assistance, they can expect
manage their income. An education program is an
reduced monthly interest payments, late fees and
excellent way for credit unions to respond to these
penalties. They can also achieve reduced expenses
societal demands. This is a relatively low-cost, high-
and increased savings. They become empowered to:
impact enhancement to credit union services,
helping members smooth out life transitions and
• Know what needs to be done and build moral
become productive members of the credit union.
support and commitment.
• Build their confidence to talk with creditors and
The Competitive Opportunity
family members.
• Have the ease and convenience of handling
Low- and moderate-income households represent
their financial affairs.
an enormous market for financial institutions that
recognize and respond to their needs. The alterna-
Credit union service is founded on the fundamental
tive financial services sector has recognized these
principles of social justice. The credit union exists for
needs and has grown precipitously as it fills them.
reasons more lofty than simply to confer profits upon
According to an article by the Ford Foundation,
shareholders. Its purpose is to help create commu-
more than 8.4 million families earning less than
nity wealth and vibrancy, and to help consumers
$25,000 per year do not have a basic savings or
accumulate resources that will make them finan-
checking account.2 A large group of additional
cially independent. A recent report by the Filene
families—more than 3.3 million—may have a savings
Research Institute (www.filene.org), Madison, Wis.,
or checking account but also use alternative finan-
suggests that consumers who overcome money
cial services providers. The two groups frequent
problems are better employees, better family members
check cashers, money transmitters and payday
and better citizens1. In short, financial wealth can be
lenders. Each individual may not use all of those
seen as an indicator of personal well-being.
1
Financial Stress and Workplace Performance: Developing Employer-Credit Union Partnerships, Filene Research Institute, 2002
2
Neil F. Carson, Capital Ideas, Ford Foundation Report, Fall 2004
2
PART 1 The Need: Why Reach Out to Low-Income Consumers?
services, but as a whole they tend to use the alterna-
In the book The Fortune at the Bottom of the
tive financial services sector rather than the
Pyramid: Eradicating Poverty through Profits,
mainstream financial services sector.
Professor C.K. Prahalad of the University of Michigan
documents how companies around the world are
Currently, at least 280 million transactions totaling
working successfully to provide products and
$168 billion or more flow through alternative financial
services to, and improve the living conditions of, the
services annually, according to a report issued in
poorest of the poor. Prahalad calls it the world’s
2004 by the Fannie Mae Foundation.3 Many house-
most exciting, fastest-growing new market, and it’s
holds are low-income families who cannot justify the
where one would least expect it: at the bottom of
relatively high costs associated with maintaining
the economic pyramid. Collectively, the world’s
regular checking accounts. And many are U.S.
billions of poor people have immense entrepre-
immigrants, a population growing at the rate of one
neurial capabilities and buying power. The author
million people per year. The total remittance flow
shows how business can learn to serve them and
from the United States to Latin America and the
help the world’s poorest people escape poverty,
Caribbean was estimated to be $30 billion in 2003,
and to do so profitably.
making it by far the largest single remittance
channel in the world according to a report by the
Not sure that providing services to low- and
Pew Hispanic Center and the Multilateral Investment
moderate-income households can be profitable?
Fund of the Inter-American Development Bank .
Consider the recent business moves of Wal-Mart. The
We’ll take a look at how credit unions can partici-
world’s largest corporation is aggressively pursuing
pate in this growing market later in this report.
the financial services market, according to a recent
4
article in BusinessWeek Online.5
On a philosophical level, reaching out to families of
modest means helps dispel the myth that a credit
Over the past three years, Wal-Mart has steadily built
union is just another type of bank. By undertaking
alliances with financial-service providers, such as
programs that serve all consumers in the community,
MoneyGram International and SunTrust Banks,
credit unions demonstrate by action what they
enabling it to offer services such as bargain-priced
profess in theory.
money orders and wire transfers. It has bank branches
operated by partners in nearly 1,000 of its super-
On a business level, the drive to deliver credit union
centers. Already, Wal-Mart customers can cash payroll
services to more Americans has greater potential
checks for just $3, transfer money to Mexico for $9.46,
when the campaign focuses on low- and moderate-
and buy a money order for 46 cents. Some competitors
income households than when it focuses on the very
charge twice as much. These are mostly high-margin,
affluent. Providers in the alternative financial services
highly fragmented businesses in the alternative
sector, along with retailers in many other business
financial sector. “Traditionally, nonbank vendors of
endeavors, have discovered that the market for
financial services have charged an arm and a leg,”
products and services to those of moderate means
says David Robertson, publisher of The Nilson Report
can be profitable. While bankers and brokers
(www.nilsonreport.com), a newsletter about credit
compete vigorously for the assets of upper-income
and debit cards. Adds Gary Stibel of New England
households, the lower end of the economic
Consulting Group in Westport, Conn.: “Wal-Mart is
spectrum is much larger and can be rewarding for
giving people in lower-income brackets opportunities
those with the creativity to serve it. In our vignettes,
in financial services they never had before.”
you’ll find examples of credit unions that have
successfully entered this market, and achieved
The BusinessWeek Online story suggests that “finan-
profitability in it.
cial services could open a rich new vein of profits for
3
Innovators in Personal Finance for the Unbanked, Fannie Mae Foundation, 2003
4
Robert Suro et al., Billions in Motion: Latino Immigrants, Remittances and Banking, Pew Hispanic Center, Nov. 22, 2002,
<http://pewhispanic.org/files/reports/13.pdf
5
Wendy Zellner, Wal-Mart: Your New Bank?, BusinessWeek Online, Feb. 7, 2005 <www.businessweek.com/magazine/content/05_06/b3919046_mz011.htm>
3
Wal-Mart as it seeks to remain a growth company. By
SERVING THE UNDERSERVED
one rival’s estimate, the market for services that WalFrom the onset, credit unions have existed for
Mart already offers is worth about $5 billion a year in
both an economic and social purpose. To
fees, leaving plenty of room for it to slash prices while
encourage credit unions to reach out to those
making a profit. As it has with other goods, Wal-Mart
most in need of financial services, the Credit Union
will slowly squeeze check cashers and wire-transfer
Membership Access Act also provides a special
providers.”
provision for serving underserved areas. Any
Credit union regulators support efforts to reach out to
federally chartered credit union, including multiple
underserved populations through field of member-
common bond credit unions, may include in its
ship expansions and programs like PALS and Access
field of membership, without regard to location,
Across America, both sponsored by the NCUA.
any person or organization within a community,
neighborhood or rural district if the NCUA Board
A Hand from Credit Scoring
Agencies
determines that the local community, neighborhood
or rural district:
• is an “investment area” as defined in Section
Fair Isaac Credit Services has introduced a new
credit risk score, the FICO Expansion Score, designed
specifically to help lenders extend credit to
consumers in new markets. Because it is based on
non-traditional credit data, it can effectively predict
risk for the growing number of U.S. consumers that fail
to receive a traditional FICO score due to nonexistent or “thin” credit histories.
103(16) of the Community Development
Banking and Financial Institutions Act of 1994;
and
• is underserved based on data of the Board and
the Federal banking agencies and by other
depository institutions; and
• the credit union establishes and maintains an
Because it uses alternative data sources, the
Expansion Score helps lenders confidently extend
credit to consumers that are typically excluded from
the traditional credit-granting process due to insufficient credit histories. The Expansion Score also helps
consumers gain access faster to traditional credit
products like credit cards, car loans or home loans
by evaluating financial relationships that are absent
in credit bureau reports.
office or facility there within a two-year period,
or the credit union’s service facility must be
reasonably proximate to the underserved area.
The credit union also must develop a business
plan specifying how it will serve the community.
According to NCUA, “The business plan, at a
minimum, must identify the credit and depository
needs of the community and detail how the credit
union plans to serve those needs. The credit union
The FICO Expansion Score accurately predicts the
likelihood that a consumer will become seriously
delinquent in the 24 months following scoring. Data
on a consumer is distilled into an actionable numeric
score. Up to five reason statements, provided with
every score, indicate why the consumer failed to
score higher, helping lenders better communicate
with consumers.
will be expected to regularly review the business
plan, to determine if the community is being
adequately served. The regional director may
require periodic service status reports from a
credit union about the underserved area to ensure
that the needs of the underserved area are being
met as well as requiring such reports before NCUA
allows a federal credit union to add an additional
Managing Innovation
underserved area.”
In their book The Innovator’s Solution: Creating and
Sustaining Successful Growth, Clayton Christensen
and Michael E. Raynor posit that industry leaders are
often blindsided by disruptive innovations— new
4
PART 1 The Need: Why Reach Out to Low-Income Consumers?
products, services or business models that initially
target small, seemingly unprofitable customer
segments, but eventually evolve to take over the
marketplace. Christensen says that to create and
sustain successful growth, business needs to adopt a
powerful and counterintuitive set of theories that
may finally resolve the vexing challenge of creating
new growth in business.
go hand in hand. Businesses and credit unions
around the world—have learned that consumers
admire the companies they perceive to be acting in
the best interest of the community, and demonstrate
their support by patronizing those companies.
Finally, U.S. credit unions have a legal mandate in
the Federal Credit Union Act to extend their services
to individuals and families of modest means. As
Christensen and Raynor seek to understand the
nature of disruptive technologies. They conclude
that innovation is much more predictable than we
thought. While the outcomes of the innovation
process have seemed random, the process itself is
predictable.
Irwindale, Calif.-based SCE Federal Credit Union
Chief Operations Officer George Poitou points out in
our first vignette, “the Preamble to the Federal Credit
Union Act, Title 12 of U.S. Code 1751 states: ‘An Act
to establish a federal credit union system and to
make available to people of small means credit for
Executives regularly make decisions based on a set
provident purposes, thereby helping to stabilize the
of theories drawn from their past experiences. The
credit structure of the United States.’”
problem is, the same theories that work well in
running an established business don’t apply when
Accessing Mainstream CU
Resources
launching a new growth venture. Each of their
decisions represent key actions that drive success
inside what the authors call the “black box” of
Mainstream credit unions possess financial, human
innovation: that critical place where new ideas are
and management resources that are generally not
either stripped of their market-making potential or
available to those seeking to create a financial insti-
shaped into powerful disruptions.
tution dedicated to the needs of low- and
moderate-income families. In this volume you will
The Power of Corporate
Citizenship
find examples demonstrating the diversity of strategies that credit unions are using, along with some of
the strengths and challenges of these approaches.
Good corporate citizenship can strengthen a credit
These credit unions are to be commended for their
union’s brand within the community it serves. In each
efforts, and for providing a road map for others to
of the five vignettes that follow, you will see how
consider similar initiatives.
corporate citizenship and common business sense
5
Barriers to Effective Outreach
Both mainstream and community development
Credit union charter applications are not approved
credit unions face a number of challenges in
by regulators unless there is a demonstrated and
reaching out to low-income and unbanked popula-
compelling need for financial products and services
tions. While mainstream credit unions have the
in their targeted community. Without the services of
human and technical wherewithal to serve a wide
a credit union, low-income communities remain
range of consumer financial needs, they often lack
without service.
cultural understanding of the unique circumstances
There are numerous reasons that the CDCU model is
of these populations, and are hard-pressed to
moving to the forefront of financial delivery in low-
engage in meaningful communication with low-
income areas. Many of the reasons derive from
income groups. CDCUs, on the other hand, have
trends in the banking business:
close ties with the people they serve, but lack the
financial, technical and management resources to
• Banks are under pressure to produce profits and
provide effective products and services.
higher stock prices. These pressures force banks to
focus on profitability and high rates of growth. As
The Challenge for Community
Development Credit Unions
these pressures translate through service and loan
About half of all 1990s start-up CDCUs failed. These
for entry-level and low-income constituents.
pricing, staffing and volume, they prevent banks
from taking individual risk, the customized product
failures were not due to excessive risk-taking. The
• Technological developments accelerate and
main reasons for failure were: under-qualified
intensify this trend: credit scoring, securitization
management and boards; inadequate capital,
and portfolio management all represent major
liquidity, bookkeeping and staffing; a limited range
departures from traditional commitment and
of services; inadequate economies of scale; the
delivery of lending and other services on a
absence of collaboration with community partners;
localized, individual loan basis.
and inadequate use of existing programs and finan-
• Regulatory approaches focus on safety and
cial institutions to support their efforts, as detailed in
The Brookings Institution’s Capital Xchange
soundness, reinforcing trends towards
newsletter.6
homogeneity and high volume at the institutional
level; i.e., efficiency ratios, delinquency rates and
An underlying barrier is the inability to pay managers
reductions in the cost of origination and
appropriate salaries, which is an ongoing problem
underwriting all add up to improved profit
for existing CDCUs as well as for start-ups. Without
margins and capital.
competitive pay scales, management turnover
• In the financial services environment created by
results in a loss of crucial institutional knowledge. In
addition, the time required to bring a start-up
the Gramm-Leach-Bliley Financial Modernization
onstream is considerable. The chartering process
Act, banks can offer a wide array of services that
alone often takes 18 to 36 months, which drains both
fit limited niches. Through these niches banks offer
resources and motivation.
insurance, retail, travel, affinity cards and other
products, looking for profitability in low-margin
businesses on the basis of dollar volume.
6
Charles D. Tansey, Community Development Credit Unions: An Emerging Player In Low Income Communities, Capital Xchange, September 2001
<http://www.brookings.edu/es/urban/capitalxchange/article6.htm>
6
PART 1 The Need: Barriers to Effective Outreach
• Low-income individuals often don’t fit the cookie
developed and managed by highly disciplined and
cutter approach to centralized loan approval:
motivated individuals, but it takes years for them to
credit history, home ownership, collateral and
build institutional success. One reason is that it takes
capital to name a few. But there are other non-
time to develop the capacity to provide a full range
financial particulars as well: language, familiarity
of services, from taking deposits and making
with administrative requirements and financial
personal loans to providing ATMs, home mortgages
literacy.
and commercial loans. It requires a strong sense of
mission to overcome the poor pay and prospects for
personal growth. This is in addition to the difficulty of
Credit Unions Play Critical Role
finding the capital and other resources required for
a successful startup.
A 2001 New York Times article reports on an example
of how credit unions can benefit their communities.7
The Challenge for Mainstream
Credit Unions
The article illustrates how and why loan sharks—
“prestamistas”—dominate the $10-million-dollar-ayear commercial lending market in Washington
Heights, N.Y., while charging 2 to 5 percent a week.
Mainstream credit unions generally possess all the
Their key advantages over banks: speed, little or no
technical, financial and management know-how
paperwork, no language barriers, high approval
that smaller credit unions serving low-income
rate—and the prestamistas know their customers.
populations may lack. However, they face barriers of
The article ended with this anecdote: “Milton
their own, not the least of which is a cultural separa-
Balacer, who operates a tiny grocery store on the
tion from the people who need low-cost, high-
Grand Concourse in the Bronx, said he borrowed
quality services most.
$14,000 from the prestamistas over the years, and
Credit union boards may not be comfortable with
paid back $28,000 with interest. Then Mr. Balacer
extending services to a population outside their
saw an ad in a local Spanish language newspaper
traditional common bond. Many boards are
for Neighborhood Trust, a credit union in Washington
composed of directors originally elected from
Heights, from which he has borrowed several
among employees of a single sponsoring organiza-
thousand dollars to spruce up his store. The interest
tion. As the credit union grows to encompass select
rates are wonderfully low, he says. ‘I’ll never use the
employee groups or a community charter, directors
prestamistas again.’”
may be reluctant to acknowledge the needs of a
culturally “different” group of potential members.
Clearly, in low-income areas like Washington Heights,
credit unions can play a critical role.
Regulations also take a toll on the willingness of
Credit union services to families of modest means
mainstream credit unions to provide outreach
provide financial capacity to the constituents they
services to households of modest means. While
serve. And CDCUs serve communities that other
regulators acknowledge in theory the need to serve
financial institutions most often cannot. At a time
low-income individuals, on-site examiners are more
when increased immigration and ethnic diversity are
likely to focus exclusively on financial ratios in their
combining with economic polarization and
audit of operations.
commodification in the banking industry, the need
Credit unions have a rich history of providing finan-
for this kind of entity is rapidly increasing.
cial services in a way that puts service and benefits
Perhaps the most critical barrier to credit union
to members above all else. The long-standing credit
services is the availability of qualified management.
union motto, “Not for profit, not for charity, but for
Many of the most successful CDCUs have been
service,” guides the policies of thousands of credit
7
Ibid.
7
unions—large and small, single sponsor and commu-
Tellers or member service representatives may need
nity. While every credit union puts its “people helping
to spend more time than average in explaining and
people” philosophy into action in a different way,
processing transactions. Intensive marketing efforts
the needs of individuals of modest means ought to
require not only translation of materials, but also an
be part of the purpose of every credit union.
understanding of any cultural issues that must be
addressed. We’ll be addressing these issues in our
Even if a credit union does not plan to amend its
vignettes.
charter to specifically include a low-income community, chances are there are people who meet a
Not all segments within a community credit union’s
practical definition of “low income” who reside
field of membership need or use the same set of
within its field of membership: seniors who have
financial services, either. A service menu that
assets, but who live on a low, fixed income; students;
includes credit cards with high limits, jumbo
single-parent families; and the working poor.
mortgages, and boat loans for more affluent
members also may need to include convenient
It is prudent to examine the credit union’s policies to
check cashing and a way to pay bills not requiring
ensure it is not disenfranchising these potential
checking accounts for members at the other end of
members. Anecdotal evidence suggests credit
the income scale. The credit union’s service
unions sometimes encounter difficulties with
packages may also need to be realigned.
examiners because of their attempts to serve the
underserved—but in some cases it is because they
While the opportunities and challenges are
are in violation of their own policies.
numerous, mainstream credit unions need to find a
way to reach out to underserved populations in their
Another barrier may be serving segments of the
own unique way. We hope the following vignettes
community for whom English is a second language.
help to encourage this process at your institution.
At a minimum, this can be a labor intensive process.
8
PART 2
EFFECTIVE CREDIT UNION
OUTREACH TO UNDERSERVED
POPULATIONS
FIVE VIGNETTES
Minority Outreach:
SCE Federal Credit Union, Irwindale, Calif.
Multiple Partnerships:
SSA Baltimore FCU, Baltimore, Md.
Social Entrepreneurship:
Vancouver City Savings Credit Union,
Vancouver, B.C.
A CUSO Model:
Credit Unions of El Paso, Tex.
Mainstream/CDCU Partnership:
Boeing ECU/Washington State ECU, Wash.
9
MAKING A DIFFERENCE: CREDIT UNIONS REACHING OUT TO
VIGNETTE
1:
SCE
FEDERAL
CREDIT
UNION
SCE Federal Credit Union:
Reaching Out to Minority Populations
$400 million SCE Federal Credit Union, with 43,000 members in Irwindale, Calif., has worked with the low-income and
generally underserved Hispanic community in Los Angeles for several years. SCE FCU was one of the first federal
credit unions to apply for and receive an underserved community field of membership from the NCUA, and now has
four branches in underserved communities. The credit union participates in the U.S. Treasury Department’s First
Accounts grant program to bank the unbanked, and
partners with community-based social service and political
Under the newly-enacted
Credit Union Membership
Access Act (HR 1151), federal
credit unions were
now empowered to serve
anybody who lives, works or
worships within an underserved
community.
agencies to bring low-cost financial services to people of
modest means.
SCE FCU was founded 54 years ago by IBEW union
members employed by Southern California Edison
Company. Later, membership was opened up to all
employees of the company. In the mid-90s, the electric
utility industry in California came under stress, and
employment at Southern California Edison was no longer a
lifetime guarantee.
By 1997, the credit union’s assets and loan portfolio had
begun to decrease in size, and management and the
board realized they needed to act to assure the future
vitality of the organization. The initial answer was to recruit select employee groups, which returned a degree of
stability to the credit union.
Then in 1998, NCUA began a search for a merger partner for a very small, state-chartered credit union in the Boyle
Heights area of South Central Los Angeles. This small credit union was in receivership, and regulators had a difficult
time attracting a partner from among state-chartered credit unions in the area. The case officer for NCUA finally
approached George Poitou, SCE FCU chief operating officer, to determine the credit union’s interest. Dennis Huber,
CEO of the credit union, supported the idea, and the merger proposal went to the board of directors for action.
Although the board had some reservations about merging with a $300,000 credit union that had been in
receivership for more than a year, it approved the proposal and urged management to take the project on. “The
board’s concerns were justified,” Poitou reports, “but our directors had faith that management could make the
acquired credit union profitable and at the same time reach out to an underserved population.” The SCE FCU board
is comprised of mid-and upper-level employees of Southern California Edison, and the population of the merger
partner was not particularly familiar to them. This would be a new market for the credit union, and it would take
quick study to serve the new group while continuing to ensure the safety and soundness of existing members’ finances.
At the same time, the board was perceptive enough to understand that the merger presented some interesting
opportunities. First, directors saw an opening to live up to the fundamental purpose of credit unions in serving people
of modest means. And second, the merger offered an opportunity to grow the credit union in a way that might
produce solid business rewards.
Under the newly-enacted Credit Union Membership Access Act (HR 1151), federal credit unions were now
empowered to serve anybody who lives, works or worships within an underserved community. Since the South
Central Los Angeles community fits that definition, SCE FCU was now able to maintain relationships with its existing
SEGs and also reach out to underserved community fields of membership.
10
PART 2 Effective Credit Union Outreach to Underserved Populations
“We were one of the first, if not the first credit union
immigrants are refugees or asylum-seekers who
on the west coast to petition the NCUA to allow it to
come to our shores to escape political or religious
serve this community,” Poitou says. “Since that first
persecution.
merger in 1998, we have added five new commu-
Today, 29 percent of all immigrants, both legal and
nity fields of membership, allowing our credit union
undocumented, come from Mexico. People from
to bring low-cost financial services to an ever-wider
Latin America, including Central America, the
population throughout the Los Angeles County
Caribbean, South America and Mexico, make up
area.”
roughly half of all immigrants entering the U.S. The
Poitou reminds federal credit unions interested in
other half of the immigrant population is consider-
serving people of modest means that their strongest
ably more diverse.
ally is the Federal Credit Union Act itself. “The Preamble
In accessing the services of an institution such as a
to the Act,” he says, “Title 12 of U.S. Code 1751
credit union, those in the higher education achieve-
states: ‘An Act to establish a federal credit union
ment groups should have little difficulty. Chances
system and to make available to people of small
are they know English, understand the economic
means credit for provident purposes, thereby helping
system and have a certain level of financial
to stabilize the credit structure of the United States.’
resources. In the case of SCE FCU, focusing on the
That’s the purpose of credit unions. We can’t forget
Hispanic underserved community, the credit union is
that purpose as we go about our daily business.”
also attracting a significant number of Hispanics with
higher levels of education and wealth. These individ-
Serving the Hispanic
Community
uals may not be considered underserved, but they
regard SCE FCU as an organization that focuses on
the needs of Hispanics and, therefore, want to do
The vast majority of immigrants arriving in the U.S.
business with them.
today come here for economic rather than political
At the other end of the spectrum, both credit unions
reasons. They are likely to have been among the
and the immigrants who need their services may
underserved in their home country from an educa-
face significant challenges. Those with low educa-
tional and income perspective. They come to
tional achievement are likely to be non-English
America without a working knowledge of financial
speakers, have little or no understanding of the
institutions in their own country, much less in this
American financial system and have minimal
country. They rely on the agencies helping them in
resources. In addition, these individuals are likely to
their home communities to recommend a place to
conduct their financial business.
be undocumented or illegal immigrants.
The statistics on immigration and the economic
SCE FCU does everything it can to accommodate
these new arrivals. The credit union will serve undoc-
power of immigrants should leave no doubt as to the
umented individuals, accepting matricular consular
magnitude of the opportunity available to credit
unions in this market.
cards as identification. In dealing with this issue, the
Approximately 1.5 million people are settling in the
requesting service may be using Social Security
U.S. each year. That includes roughly one million
numbers that do not belong to them. At the same
legal immigrants and about one-half million illegal
time, these people are not using Social Security
immigrants. Of legal immigrants— those who hold a
numbers for identity theft or other criminal purposes,
green card entitling them to permanent residency in
so the staff members explain that they need to
the U.S.— about two thirds are individuals who have
provide legitimate identification such as a matricular
a family member here. About 15 percent are
consular card before they can join.
credit union realizes that some prospective members
employment-based immigrants: They have skills or
Many of these people have already established
talents that are in demand in the U.S. and they have
credit in the community with local merchants. The
an employer sponsoring them. About 10 percent of
11
credit union will consider that kind of credit as it
segment. Members with very high credit scores have
verifies their status. Once their legitimate identity is
a number of options when it comes time to borrow
verified, they can open an account.
for an automobile, a home or an education. But
those of limited means are often preyed upon by
The Legislative Agenda
lenders because they have fewer choices. The
By reaching out to serve the underserved, credit
table in loans to minorities and low-income house-
unions also demonstrate to lawmakers that they do
holds is significant, both in terms of rates and fees.
pricing difference that credit unions bring to the
not require the kind of legislative oversight that
Partnerships Are Key
banks are under with the Community Reinvestment
Act. Service to low- and moderate-income
Americans is also a demonstration that credit unions
The most effective way to make a success of
deserve to keep their current tax status. “When we
reaching out to a community in the SCE FCU experi-
show by actions rather than words that we are self-
ence is to establish a local presence—a local
help cooperatives,” Poitou says, “then we gain the
branch, not just shared branches or ATMs or bank by
support of Congress and state legislatures as well as
mail. Credit union people must speak the language
opinion leaders in our communities.”
of their members and potential members. After that,
the credit union must have relationships with
While credit union boards and management need
community organizations. The vast majority of SCE
to be concerned about conserving capital and
FCU’s marketing in the Hispanic community is done
protecting the financial resources of current
through local organizations—both non-profit
members, they also need to understand that the risks
agencies and political jurisdictions.
involved in taking on new fields of membership can
be minimized. Credit union board makeup may
The credit union’s branch managers and its public
reflect a member population that is not familiar with
relations manager work together. For example, as
market segments that need service and can also
this publication goes to press, SCE FCU is about to
make a contribution to the credit union’s bottom
open a branch in Lynnwood. Credit union officials
line. It is natural to feel uncertain about areas we
are meeting with the local Chamber of Commerce,
have not personally experienced, but research can
the elective representatives of the community and
go a long way toward allaying those fears.
non-profit agencies in anticipation of moving into
that community. Together with these highly
In the state of California, the reluctance to take on
respected entities, the credit union can show
the risk of serving underserved populations is gradu-
residents who its people are, what it does and why it
ally receding. Boards see what SCE FCU and others
is in their best interest to investigate the benefits of
in the state have done to reach out and understand
membership.
the philosophical, legislative and business benefits of
these programs. Within the Hispanic population
SCE FCU supplements its outreach program with
being served by SCE FCU, for example, the average
financial literacy classes in Spanish in the under-
age is much lower than the average age of the
served communities in which it has a presence. The
non-Hispanic white population in the state. That
credit union’s approach has evolved over time, and
means the opportunities for lending to younger
it now operates a training program for its staff.
members are greater within this population. Net
Employees who wish to participate can become
borrowers outnumber net savers in the Hispanic
certified as instructors and go out into the commu-
population, and help to balance the credit union’s
nity. This is a volunteer program that is currently
assets and liabilities.
staffed by 15 certified SCE FCU employees.
At the same time, credit union services can also
The key to the credit union’s success with its financial
create significant savings for members in this market
literacy classes is, again, working with community
12
organizations to encourage residents to attend.
cannot be overstated. Language serves not just as a
Community organizations have earned credibility
communications vehicle, but to establish a bond
and the trust of residents, and that makes all the
with people and organizations. When SCE FCU staff
difference. Agency staff knows who their clients are,
attends meetings with Hispanics, they establish their
and they market the program for the credit union.
credibility by always beginning the meeting in
Spanish. All things being equal, if the credit union
Another important resource SCE FCU has accessed is
offers the same product as a competing bank, the
the U.S. Treasury Department’s First Accounts grants
fact that it communicates in Spanish is often the
program. The Treasury Department has money avail-
deciding factor in where an individual goes for
able for programs that reach out to people who
financial services. This is another way to differentiate
have no banking relationship. Through these
the credit union.
programs, the unbanked are given advice and
counsel in how to manage their financial lives and
The credit union quickly learned that language is the
enter into the mainstream financial services world.
most important prerequisite to serving the Hispanic
SCE FCU accessed the program through a grant the
population. At its East Los Angeles branch, all front
National Credit Union Foundation (NCUF) received
line people speak Spanish, marketing materials are
from the Treasury Department and administered
printed in Spanish and the call center offers a
through the state credit union league. SCE FCU
Spanish-language option for members making
applied to the California Credit Union League for
telephone transactions. With a staff that is 50–75
funds and was successful in that effort. Four credit
percent Hispanic, the credit union initially assumed
unions in California were chosen to participate in
these employees could speak Spanish. It later
the program.
discovered that many Hispanic employees could not
speak the language, and many who thought they
It should be noted that the leagues and other trade
could had not mastered a vocabulary of Spanish
associations are excellent resources for credit unions
financial terms. Many also spoke a kind of colloquial
that want to expand their outreach to serve under-
Spanglish learned on the streets and at home that
served populations. In California, league President/
was not applicable in a business setting.
CEO David Chatfield and the league staff are
committed to assisting credit unions in their outreach
Success Factors
programs, and with good reason. Southern California’s
overall population is more than 50 percent Hispanic,
SCE FCU’s success in making its East Los Angeles
so it makes sense for all credit union organizations to
do what they can to reach out.
branch profitable is due to a number of factors.
That 50 percent Hispanic population, however,
“We hired a Spanish-speaking branch manager. We
cannot be regarded as homogenous. It is comprised
translated our print materials into Spanish, including
of native-born citizens as well as immigrants from
loan documents. And we established contact with
South and Central America, Mexico, Cuba, the
community leaders and elected officials.”
“Success begins with having a focus,” Poitou says.
Caribbean and other home countries. Each of these
The building in which the branch is located is an
populations has its own culture and traditions, and
interesting story in itself. It is a 60,000-square-foot
varies with respect to financial knowledge, occupa-
facility, and initially the credit union was the only
tion, age, wealth, citizenship status and other
tenant. The building was in need of major repairs.
factors. And just as credit unions segment member-
The new owners remodeled it to its original 1917
ship groups in other ways, they need to segment
condition. Today, every organization with offices in
their members in terms of ethnicity and national
origin as well.
the building is a non-profit or government office. The
SCE FCU reports that the importance of communi-
building. That has helped the credit union immeasur-
cating with these groups in their own language
ably, because it puts it in proximity with community
council member for the city has offices in the
13
agencies. The grand re-opening of the branch was
occasional activity. It takes commitment from top to
in July 2000.
bottom within the organization.
Poitou says the political advantages SCE FCU’s
Education is a key issue in attracting and retaining
outreach programs give the credit union are
Hispanic members, not just for underserved popula-
enormous. Those programs allow credit union repre-
tions but for the credit union, its employees,
sentatives to talk to legislators and administrators at
management and board of directors as well. In
the local, state and national level, and be given
order to serve immigrant communities, the credit
immediate access largely because they know of the
union must become part of the community. The
organization’s work in the underserved community.
manager of SCE FCU’s East Los Angeles branch is
When proposals akin to Community Reinvestment
involved in a wide range of community activities
Act regulations are generated, SCE FCU is able to
and sets the standard for the rest of the staff. The
speak with authority on behalf of credit unions and
credit union keeps in touch with educational, polit-
the outreach work they do. Outreach programs are
ical and religious leaders within the community so it
not typically undertaken with the purpose of self-
is aware of the needs of members in that area.
congratulation, but that is one of the rewards they
In tracking profitability, the credit union assesses
most certainly deliver.
both direct and indirect costs. A percentage of
SCE FCU dovetails its corporate philanthropy
corporate costs is assigned to each branch
program with its outreach to underserved communi-
commensurate with that branch’s membership
ties. In one unique program, the credit union
base. Currently, the East Los Angeles branch is
requests a ten dollar community participation fee of
profitable even accounting for indirect costs. The
its new members. The organization then matches
branch also brings in loan volume to balance the
those funds dollar-for-dollar and allocates them to
credit union’s overall loan-to-share ratio. By all
worthy agencies in the community. “We donate
measures, it is a profitable operation.
about $80,000 to community service organizations
Charge-offs at SCE FCU typically do not come from
each year,” Poitou says. “As we developed the
first time immigrant borrowers. These individuals have
community participation program, we quickly
not yet learned the ways in which to use bankruptcy
discovered that we needed to set some guidelines
as a crutch, and there is a cultural taboo in the
for participation by local organizations. We carefully
Hispanic community against letting bills go unpaid.
examined the work of key agencies and then established relations with those that met our criteria. We
SCE FCU’s advice to other credit unions wishing to
have a preference for small local organizations
reach out to underserved populations is to first
where we can make a difference.”
establish a relationship with the appropriate community organizations. “That is absolutely vital,” says
Evaluating Results
Poitou. “The only way to penetrate a low-income
On the philosophical level, SCE FCU is extremely
zations they trust. For many of these people, a credit
happy with the results it has achieved through its
union is just another kind of bank, but they do trust
outreach program. Politically, serving underserved
the social service agencies that advise them on
populations has also produced unexpectedly
other issues. When the credit union works with those
positive results. And on a business level, the SCE FCU
agencies, it acquires the same level of credibility
branch in East L.A. achieved profitability about a
accorded to trusted advisors.”
population is to work with local people and organi-
year and a half after it opened.
Poitou emphasizes that SCE FCU is not in business to
But Poitou cautions that in order to succeed, the
give money away, “but we want to serve individuals
credit union must give strategic focus to these initia-
who are unbanked, undocumented or haven’t
tives; they cannot be an afterthought or an
been served by a financial institution in the past. We
14
don’t do a great deal of underwriting on a $250 loan
not buying $30,000 cars. A $2,000–3,000 auto loan is
—we request a credit report, and if there are no
more common, lowering the risk level. What we are
negatives we’re likely to grant the loan. We also
hoping for is that the member who takes out a $200
consider character issues such as length of
loan today will be back for a $500 loan in the near
residence. And we talk with community leaders who
future, and a first car loan shortly after that. We’re
may know the individual. Typically these people are
building business in this way.”
Contact Information
For further information on the SCE FCU outreach experience, contact:
George Poitou
Chief Operating Officer
SCE Federal Credit Union
P.O. Box 8017
El Monte, CA 91734-2317
[email protected]
626–960–6888, ext. 2370
15
VIGNETTE
2:
SSA
BALTIMORE
FEDERAL
CREDIT
UNION
SSA Baltimore Federal Credit Union:
Successful Outreach through Partnership
For $280 million SSA Baltimore Federal Credit Union, reaching out to an underserved population within Baltimore City
proved productive in serving not only new members of modest means, but the credit union’s existing 43,100
members as well. As the credit union entered the new century, banks had fled a neighborhood where the median
income was $19,000 and 58 percent of the residents lived below the federal poverty line. When the last bank left in
the late 1990s, neighborhood residents were limited to check-cashing outlets and pawn shops. Into this void SSA
Baltimore FCU and its community partners stepped, sensing an unrealized potential.
“In talking with our board of directors in strategic planning sessions,” says former President/CEO Jack Houseknecht,
“we chose the underserved route to expansion at least in part to protect our occupational relationship with the
Social Security Administration.” At that time, the credit union had only two public offices, neither of which was in the
city. The challenge was how a credit union with no public offices could expand in a city of 630,000 people. A branch
office network wasn’t economically feasible, especially in low-income areas. “As a credit union,” Houseknecht says,
“we’re not for profit, but at the same time we’re not in business to lose money.”
About SSA Baltimore FCU
SSA Baltimore was formed in 1938 to serve employees and family members of the Social Security Administration,
headquartered in Baltimore. In the early 1990s, the credit union became concerned that its growth rate was not as
robust as it might be, as the Social Security system became more and more automated and agency employment
waned. The credit union began searching for alternative ways in which to attract and serve new members.
One of the challenges the credit union faced was establishing a location outside SSA headquarters, which had
become less accessible to family members after the Oklahoma City bombing and the 9/11 attacks. To serve family
members easily and effectively, SSA Baltimore FCU needed to become more convenient for them.
As a first step in overcoming that barrier, the credit union
To serve family members easily and
effectively, SSA Baltimore FCU needed to
become more convenient for them.
merged with the Greater Baltimore Merchants’ Employees
Federal Credit Union, which served approximately 90 select
employee groups. But even with the SEG groups, growth
was modest.
Discussion among management and the board of
directors led to considering service to an underserved
population as one way to increase membership without changing the credit union’s charter. The most underserved
local area available was Baltimore City. The 1990 U.S. Census classified 86 percent of Baltimore City as being
underserved, and the 2000 census classified the entire city as underserved. There are pockets of affluence in
Baltimore City served by banks and credit unions, but overall the city is considered underserved.
“We were determined to do what NCUA had in mind when it authorized service to underserved communities as
one route to charter expansion,” Houseknecht says. “We knew that if we could find a way to serve the underserved
and meet the letter and intent of law and regulation, it would open up a substantial service area to us and at the
same time preserve our excellent relationship with our primary sponsor. By doing the right thing, we also maintained
a good relationship with our regulator and our examiners.”
Circumstances presented an excellent opportunity for SSA Baltimore FCU, one that the board was quick to grasp.
The credit union was reluctant to open a full service branch in the city immediately, understanding that other
financial institutions had left the area for sound business reasons. But with some creative thinking, SSA Baltimore FCU
was able to find a solution to the barriers it faced.
16
As a first step in creating outreach partnerships, the
submitted its plan for service to the Baltimore City
credit union consulted with a number of community
underserved community to the NCUA, and received
organizations to come up with a way in which it
approval late in 2002. By June 2003, the infrastruc-
could establish a brick-and-mortar presence in the
ture was in place and the new office was open for
city, and soon Houseknecht came up with a
business. By year-end 2004, the credit union had
concept called Neighborhood Contact Offices.
enrolled just under 1,000 members at the branch.
Through this program, the credit union proposed to
Kevin Roland, SSA Baltimore FCU’s VP/marketing,
partner with community organizations in non-cash
says: “We did not enter the partnership to be a low-
outlets that would serve the needs of inner-city
income credit union. We think that over time we will
residents.
make serving this underserved community profitable.
The credit union’s first partnership was with a group
We need to find the right mix of products and
called Operation ReachOut Southwest, a coalition
services, and continue to work with our community
of community groups and neighborhood organiza-
partners. We also hope to be able to establish a full-
tions in Southwest Baltimore City. Credit union
service branch somewhere in the city within a
management knew that cash services are an impor-
reasonable length of time.”
tant priority in the area, and sought to find ways to
The credit union believes that a physical location is
offer cash in a cost-effective manner.
a key component in attracting and serving under-
Operation ReachOut Southwest brought a check-
served populations. The confidence of residents
cashing service, A&B Check Cashing, to the partner-
increases substantially when there is a physical
ship, thereby creating a one-stop shop for financial
presence in their neighborhood, and a key to
services. A&B offers quick check cashing, money
attracting residents to choose the credit union to
orders and photocopies; an SSA Baltimore FCU
conduct their financial business. “Without a physical
employee handles all non-cash bank transactions,
location,” Roland says, “people are reluctant to
including new accounts, deposits, transfers and auto
establish ties with a financial institution.”
and consumer loans; and an Operation ReachOut
Houseknecht says it would have been extremely
Southwest staff member signs people up for weekly
difficult to make a success of this program without
financial literacy classes. The three organizations set
the help of community partners. The mayor’s office
up shop under the name Our Money Place to
put the credit union in touch with Operation ReachOut
identify the range of services available to residents.
Southwest. The banking commissioner was also
The SSA Baltimore FCU management and board was
helpful in finding partners.
confident that a branch in the underserved south-
Both management and the board of directors at
west part of the city could succeed, because
SSA Baltimore FCU are very socially conscious.
Operation ReachOut Southwest had done its
Houseknecht serves on a number of community
homework with respect to identifying potential users
boards, and each of the credit union’s directors is
and was eager to establish a branch.
active in the community, contributing to organiza-
While it does not offer cash services at the Our
tions that are helping make a difference in Baltimore.
Money Place location, the credit union does have a
“And that’s in addition to their volunteer service on
full-service ATM machine available at the location
the credit union board,” says Houseknecht. “One of
and shares income from that facility with its commu-
our board members also has a sister who is a state
nity agency partners.
senator and a daughter who is a Baltimore City
councilwoman. Our 11 directors understand with
The Neighborhood Contact Office concept is part of
their hearts that outreach to underserved popula-
a plan credit union management worked out with
tions is the right thing to do, and at the same time
consultants D. Hilton Associates to define the
they understand with their heads that serving under-
community it wished to serve. The credit union
served populations makes good business sense.”
17
After opening its Southwest Baltimore office, SSA
emergency loans in case of default. The emergency
Baltimore FCU established two additional part-time
loan program is offered only at the Our Money Place
locations, one in a Baptist church in northwest
location.
Baltimore and another in a retirement community.
Individual Development Accounts (IDAs) are another
These are also non-cash locations.
product tailored specifically for SSA Baltimore FCU’s
The credit union is currently making plans to repli-
underserved community. IDAs are special savings
cate its Our Money Place facility on the east side of
accounts designed to assist low-income people on
Baltimore, which is also underserved and has a large
their path toward asset building through matched
Hispanic population. There are also significant
savings and financial education. IDAs reward the
African-American and Eastern European populations
monthly savings of people who are trying to buy
in the East Baltimore area where the new office will
their first home, pay for college or start or expand a
be located. The neighborhood is more diverse than
small business.
the Southwest area, which is largely African-
To get the word out on the Our Money Place
American.
location, SSA Baltimore FCU conducts direct mail
This partnership will be similar to the one with A&B
programs and sends out flyers to nearby neighbor-
Check Cashing, but the partner here is MicroFinance
hoods. Operation ReachOut Southwest has also
International. MicroFinance International’s business is
promoted the Our Money Place in its communica-
primarily international wire remittances, but the
tions with clients. The credit union offers special
organization also wants to offer check-cashing
incentive programs to residents in the area, such as
services.
gift certificates to a grocery store located in the
same shopping center as the credit union office.
SSA Baltimore FCU also recruits new members
“Our larger media advertising program involves both
through indirect lending partnerships with area
radio and print,” Roland reports, “which also reaches
automobile dealers. This membership segment is
our underserved member segment.”
open to anyone who lives, works, worships or goes to
school in Baltimore City, or is a family member of
someone who does.
Great Expectations
In its pending east side outreach program, SSA
On the business level, SSA Baltimore FCU is not yet
Baltimore FCU is also recruiting partners. Ties have
where management would like it to be in terms of
been established with the East Harbor Community
membership. Although the credit union did not
Development Corporation, a quasi-city program.
expect very large deposit or loan levels initially, it has
reaped income on its loan programs and fees at the
“We also tailored some of our products and services
Our Money Place office. “We’re counting on those
to the communities we are serving,” says Roland.
two sources to make the facility profitable,” Roland
“For example, we offer a Wealth Builder loan that
says. “Underserved communities in general are
helps to build or re-establish credit. This $2,000 loan
credit and fee driven, and our job now is to build
is a kind of savings account to which the member
the volume necessary to achieve profitability.”
makes payments, and instead of getting the
proceeds at the start of the loan period, they get
In laying plans for a branch in the largely Hispanic
the proceeds at the end of that period.”
community the credit union will enter next, the
challenge is to understand that the population is
The credit union offers an emergency loan program
very diverse in terms of income and wealth, ethnic
through which members can apply for a $300 loan
background, education, age and culture. Many
designed to help them in difficult circumstances. The
new immigrants are distrustful of financial institutions
Bon Secours Foundation, another partner in the
because they were either shut out of, or treated
outreach effort and a key member of the Operation
poorly by, those in their native land. SSA Baltimore
Reachout Southwest organization, guarantees
18
FCU believes that once it has earned the trust of
to underserved areas. The credit union has a
these residents, they will become loyal members.
substantial corporate contributions budget through
which it gives back to the neighborhoods it serves.
That test, however, is formidable. A major infrastructure is required before the credit union can establish
To assist in that effort, Operation ReachOut
a presence in the Hispanic community. It involves
Southwest includes an asset coordinator position on
more than simply translating print materials into
its staff. This employee works with the agency’s
Spanish and opening the doors. Branch employees
clients to introduce them to mainstream financial
need to be bilingual, and must be familiar with finan-
service institutions and has been instrumental in
cial terminology as well as conversational Spanish.
helping SSA Baltimore FCU establish itself as part of
The credit union call center also must offer the
the community. The asset coordinator helps residents
services of bilingual representatives, and ATM and
rebuild their credit, save to buy a house or car and
online banking screens must be available in Spanish.
explore educational opportunities. There’s even an
All these facilities must use business Spanish terms
official “greeter” at the Southwest facility, whose job
that are accessible to members and potential
it is to explain to consumers how to use the various
members. In short, the initiative requires a significant
services available there.
investment, possibly in the magnitude of six figures.
The corporate culture at SSA Baltimore FCU includes
With all of that, SSA Baltimore FCU expects to get the
a commitment to community service, and that belief
new branch up and running during the first half of 2005.
has translated into a number of industry awards,
including a national first place award in CUNA’s
The Right Stuff
Louise Herring Philosophy in Action program in 2003.
In the course of establishing the Neighborhood
Roland suggests that it takes time to achieve success
Contact office in Southwest Baltimore, Houseknecht
with the kind of outreach program undertaken by
and Roland made more than 30 contacts with founda-
SSA Baltimore FCU. “There are no quick answers,” he
tions, city and state officials and community agencies.
says. “With experience, the credit union can adjust
Eventually, it was the Maryland Banking Commissioner
its operation to suit the particular needs of the
who referred them to Operation ReachOut
population it wishes to serve. Profitability is perhaps a
Southwest. Catholic Charities and the Hispanic
two-to-three year time horizon. If we offer products
Chamber of Commerce, as well as the mayor’s
that appeal to underserved individuals, we will win
office, agreed to work with the credit union too.
their business. Partnering with community groups and
organizations is the credit union’s best communica-
SSA Baltimore FCU demonstrates its commitment to
tions channel to get the word out.”
the community in financial terms as well as in service
Contact Information
For more information on the SSA Baltimore FCU outreach experience, contact:
Kevin E. Roland
VP/Marketing
SSA Baltimore Federal Credit Union
7135 Windsor Blvd
Baltimore, MD 21244
[email protected]
410–281–6239
19
MAKING A DIFFERENCE: CREDIT UNIONS REACHING
VIGNETTE
3:
VANCOUVER
CITY
SAVINGS
CREDIT
UNION
Vancouver City Savings Credit Union (VanCity):
Committed to Community
BACKGROUND
With more than $10 billion Canadian in assets, Vancouver City Savings Credit Union, or as it is familiarly known,
VanCity, is large by credit union standards. Founded in 1946 and now the largest credit union in Canada (and one of
the largest in the world), VanCity owns Citizens Bank of Canada, which serves members across the country by
phone, ATM and on the Web.
VanCity operates 42 branches throughout Greater Vancouver, Fraser Valley and Victoria, and is open to all
residents of British Columbia. It currently serves 305,000 members. Yet despite its relative size, “we’ll never be as big
as the banks we compete with,” says Dave Mowat, CEO. “None of our operational challenges will be solved by
scale. We succeed entirely by differentiating ourselves from the competition.”
The Secret Sauce
VanCity seeks to differentiate itself on three dimensions:
1. THE MEMBER EXPERIENCE— The credit union positions itself as a member advocate, doing whatever is necessary
on behalf of its members.
2. THE EMPLOYEE EXPERIENCE— “Well trained, smart employees are unlikely to provide inferior service,” Mowat says.
3. AS A COMMUNITY LEADER— Being a good corporate citizen means building a solid connection of trust and putting
the credit union’s money where its mouth is.
Weaving these three principles together— members have a great experience provided by excellent staff in an
environment in which the credit union has a profile of community leadership— provides the foundation for VanCity’s
business case. “It’s our secret sauce,” Mowat says. Linking
“It’s our secret sauce,” Mowat says.
Linking these principles together—
great service, a great place to work,
and being great neighbors—
moves VanCity forward and allows
the credit union to compete with
financial institutions many times larger.
these principles together— great service, a great place to
work, and being great neighbors— moves VanCity forward
and allows the credit union to compete with financial
institutions many times larger. Mowat notes that operating in
this fashion requires a long-term view of the world. If the
sole purpose of an organization is profit, that organization
tends to focus on short-term results. But a business strategy
of scrutinizing and trying to manipulate the numbers quarter
by quarter is often the death knell for financial institutions,
Mowat believes.
Balancing member service with a positive work
environment within the larger context of community
leadership and involvement forces a longer look and forges a long-term business strategy. An institution’s reputation
lasts a long time, Mowat notes, and a strong leadership position creates momentum.
Doing Well By Doing Good
VanCity’s commitment to community is central to its success because, as Mowat points out, “as a community-based
institution, we go the way the community goes.” In some institutions, the process is to carry on with business Monday
through Thursday, and then do something good for the world on Friday, he explains. Even some credit unions see
20
community involvement as competing with the
4. By advocating for social and environmental
business of the credit union.
responsibility in order to make a positive
difference to individuals and the community.
At VanCity, on the other hand, the fundamental
premise is “if something benefits the community, it
This strategy of “doing well by doing good” does not
benefits us,” Mowat says. “If community involvement
require a more socially leaning philosophy, Mowat
is seen as something to work at off the side of your
says. “We are not afraid to talk about profit,” he
desk, you will never find time or the money to do it.”
says. “VanCity is fiercely proud of our profits, the
But when it’s central to how you differentiate yourself
level of service we provide and our community
in the marketplace, that’s when it becomes part
participation.”
and parcel of your business strategy. People in the
VanCity’s Statement of Values and Commitments
community notice organizations that are good
describes in detail how the credit union goes about
corporate citizens, but to be successful the organiza-
serving its purpose: “Working with people and
tion’s actions must be consistent with what it is
communities to help them thrive and prosper.” Its
doing. VanCity’s profile as a community leader is
commitments include:
high, but it would never undertake a project only for
the publicity it would generate.
• Being responsible and effective financial
managers;
An integrated approach allows the credit union to
take advantage of opportunities that might other-
• Providing outstanding service to help members
wise be missed. As an example, Mowat describes
achieve financial goals;
serving on an advisory committee to raise money for
• Providing meaningful opportunities for members
a local community center with a 100 year history.
to have a say in setting the direction of the credit
While he was not there to open accounts, he made
union;
a connection on the committee that led to
VanCity’s funding of a major construction project.
• Ensuring VanCity is a great place to work;
VanCity believes corporate social responsibility goes
• Leading by example, using resources and
beyond donating dollars or volunteering for worthy
expertise to affect positive change in its
causes, although as described in detail later, the
communities; and
credit union is active on both these fronts. For
• Being accountable for living up to its
VanCity, corporate social responsibility means
commitments.
operating in a way that is responsible to members
and staff, respectful of the environment and
supportive of its community. The credit union cites
Partnering with Members
and Employees
the following guiding principles as it strives to be a
leader in corporate social responsibility:
One of the ways VanCity gets members involved is
1. By offering socially and environmentally
through its EnviroFund VISA card program. Each
responsible business products;
year, the credit union develops a short list of environ-
2. By investing in the community’s well being
mental causes and members vote on the local issues
through grants, scholarships, awards, fund raising
of most concern to them. Community groups submit
and community service;
applications for projects that address these
concerns, and 10 percent of card purchases are
3. By adopting socially and environmentally
awarded to fund those that best meet the criteria of
responsible business practices; and
local focus, action-oriented, ongoing and community-based.
21
In addition, members choose from a short list of
micro credit program is designed to serve new
candidates for the credit union’s annual VanCity
immigrants and marginalized residents who have
Award, a $1 million grant the credit union introduced
difficulty accessing traditional credit sources. Most of
in 2001. Members can vote on line, in a branch or by
these people do not have a credit rating, or may
telephone. Winners have included a cultural center,
have a poor credit rating. The support of the peer
a greenway project and a drug treatment center
group allows them to create economic self-reliance
that integrates addiction services, transitional
and develop their business idea, which may be full-
housing and employment and education services
time, seasonal, or part-time, a hobby that has turned
under one roof.
into a business, and/or home-based.
These awards build capacity for their recipients and
VanCity members in good standing for at least six
also engage members and members’ money in the
months, or enrolled in or graduates of a self employ-
support of the community, Mowat notes.
ment or similar entrepreneurial program, who want
to start or expand a business can apply for a Self-
VanCity’s employees do their part in contributing to
Reliance Loan. Approval on loans up to $35,000 with
the success of the community as well. Employees are
a maximum five-year term is based primarily on
encouraged to volunteer in their own communities
character and credit history. Borrowers may
and engage in an annual employee fund raising
postpone up to two payments a year, with an option
campaign. Employees choose an area of concern
to postpone the first two. Applicants must submit a
from the following list: Community enhancement,
business plan, a resume, two written character refer-
environment, community health, animal welfare and
ences and evidence they have invested in the
animal rights, peace and human rights and commu-
business at least 10 percent of the amount they
nity arts and culture.
want to borrow. If it is an existing business, financial
statements are required for its time of operation.
Once an issue is identified, proposal requests are
sent to organizations working in that area of concern
VanCity supports youth entrepreneurs through a
and meet a set of criteria including being a regis-
partnership with the Canadian Youth Business
tered charity in British Columbia, operating consis-
Foundation, a leader in providing support to youth
tently with VanCity’s Statement of Values and
ages 18 to 34 years who want to start and grow
Commitment and providing volunteer and educa-
successful businesses.
tion opportunities for credit union staff. Staff then
chooses an organization from a short list selected by
Yet another traditionally neglected market— individ-
an employee advisory group. In 18 years of opera-
uals with disabilities— is served by the credit union’s
tion, the staff has raised more than $1.5 million.
ABLED program. In partnership with Western
Economic Diversification, a department of the
Backing Entrepreneurs
Canadian government, ABLED—Advice and Business
Loans are the heart of VanCity, as they are at credit
self-employment opportunities. Business start-up
unions everywhere. But VanCity’s portfolio includes
loans are available for up to $35,000—those with at
loans reflective of its social conscience. The Peer
least six months’ experience operating a business
Lending program, for example, provides loans to
can get loans up to $75,000. During the application
groups of at least four business owners who agree to
process, VanCity helps applicants locate business
support each other through the loan process.
planning resources and identify training needs and
Individuals within the group may apply for a loan for
resources, and provides adaptive technology for its
business purposes. When the loan is repaid, they can
staff members to facilitate the process. Successful
come back to the credit union for future loans in a
applicants can take advantage of ongoing training
stepping-stone process. Loan sizes range from $1,000
resources as well as limited business counseling
to $5,000, and terms from 3 months to 2 years. This
services during the term of the loan. Loan criteria are
Loans for Entrepreneurs with Disabilities—encourages
22
based on credit history and investment in the
concerns, every class of loan has an equity base.
business. Applicants must provide a business plan,
The higher the risk, the more capital must be
two written character references and a reasonable
reserved against it.
credit history. They also must have invested 10
Mowat believes good lenders are venture capitalists
percent of the amount of the loan; this can include
and they understand that in some situations they
cash, assets, prior investment into the business or
need to take more risk to be successful. VanCity is in
sweat equity.
the business of being innovative in its risk tolerance,
Providing services to some 7,000 nonprofit organiza-
and the credit union serves its core purpose (Working
tions is another avenue VanCity uses to do well, by
with People and Communities to help them Thrive
doing good. The credit union successfully attracts
and Prosper) while providing nonprofits with critical
both deposits and loans. On the deposit side,
access to funding.
VanCity puts together an investment pool to
VanCity contributes up to 30 percent of its earnings
maximize returns to organizational depositors. One
to the community—or some $15 million in 2004—but
example is a local rental housing association that is
it does not try to be everything to everybody.
made up of smaller organizations requiring funds for
Management and the Board of Directors have
emergencies and maintenance. The buildings
chosen to focus on two areas: social sustainability
belong to the association, and each gets the top
and the environment. In the area of social sustain-
level return on deposits through a pool arrangement.
ability, the credit union seeks to build capacity and
This benefits both parties: A single organization might
provide access to capital for entrepreneurs, both
have a fund of $50,000 to $100,000 on deposit,
individuals and organizations. Many nonprofits are
earning less than optimum return. But 50 to 100 of
creating businesses that help solve a social problem
these accounts add up to a large deposit for
and need funding. The credit union provides grants
VanCity, which can get the highest rate of return in
to these organizations, but it also makes money in
the marketplace. Members in good standing with
lending to them.
the Co-Op Housing Federation of BC, the British
Columbia Non-Profit Housing Association, and the
The credit union also is seeking to help the commu-
United Community Services Co-operative can open
nity leave a lighter footprint on the environment
separate accounts, but earn a special prime interest
through a combination of grants and loans.
rate due to the pooling. A low monthly fee covers
Examples range from special loan rates on hybrid
items such as deposits, withdrawals, check clearing,
cars to a partnership with the Real Estate Foundation
chargebacks and so on.
of British Columbia for Green Building Grants. The
Green Building Grants program provides grants to
For those who think socially responsible lending is too
nonprofits for building renovations, retrofits and
risky, Mowat asserts it is a matter of how the subject
regulatory changes to support more environmentally
is approached. For example, lending to a nonprofit
friendly buildings. In 2005, three recipients received
entails the same analysis as other types of lending,
$100,000: Islands Trust Fund for its rainwater project;
and loan officers are expected to exercise good
O.U.R. EcoVillage in Shawnigan Lake for the
judgment. But by working hard to understand the
greening of its climate change demonstration
nonprofit’s business, an appropriate risk assessment
building; and the Society Promoting Environmental
can be made. For example, what is the donor history
Conservation in Vancouver for its sustainable energy
and is it expected to continue? The credit union also
demonstration project. VanCity was the first financial
fine-tunes its allowance for loan loss process. Typically,
institution in Canada to join the Canada Green
a loan loss reserve of one-half of 1 percent would be
Building Council, a group promoting the design and
allocated. For loans to nonprofits that might be
construction of green buildings.
riskier, the credit union provides for a 10 percent
allowance for loan loss, funds that are allocated
from its philanthropy budget. To satisfy regulatory
23
Evaluating Success:
The Social Audit
In addition to its biennial public, externally verified
VanCity’s Statement of Values and Commitments is
to its Statement of Values and Commitments, using a
more than a set of lofty goals. To make sure those
combination of stakeholder survey results and inter-
goals guide the credit union’s business decisions and
nally generated data. As a result of VanCity’s focus
strategies, and to measure its progress, VanCity
in this area the credit union was chosen as the best
report, VanCity reports annually on Key Performance
Indicators to measure overall performance relative
engages in a social audit process that includes
place to work in Canada by Maclean’s Magazine in
identifying stakeholder issues and areas for improve-
2004.
ment through data collection, stakeholder consultations, and document review. The process is on a
Advice for Others
two-year cycle and is based on an international
process standard (AA 1000) for social and ethical
Overlaying community work with the core work of
accounting, auditing and reporting. Just as a finan-
the credit union is key, Mowat advises. “Being
cial audit provides a report card on a credit union’s
involved is a viable part of the credit union way of
financial status and recommends areas of improve-
doing business,” he says. “It’s a way to differentiate
ment, a social audit also tracks performance and
the credit union in the eyes of consumer. Possessing
identifies areas needing improvement. VanCity uses
a reputation as a strong community leader can be a
its social audit process to set targets and action
powerful method of differentiation and that does
plans as well as a way to strengthen relationships
not change from market to market.”
with its stakeholders. Consulting with stakeholders
But Mowat cautions that a credit union can’t be
provides the credit union with the opportunity to
everything to everybody: There’s a need to focus. “It
better understand their needs and expectations and
doesn’t matter how narrow the focus is,” he says.
respond to the issues raised. VanCity cites these
“For example, if the organization’s focus is helping
additional benefits from social auditing:
inner city youth, it needs to become an expert in the
issues driving that focus. Otherwise, it will become
• enhanced reputation
frustrated because there is only so much a single
• innovation and market differentiation
contributor can do.”
• recruitment and retention
• improved risk management
• operational efficiency.
Contact Information
For more information on the VanCity outreach experience, contact:
Dave Mowat
Chief Executive Officer
Vancouver City Savings Credit Union
PO Box 2120 Station Terminal
Vancouver, British Columbia V6B 5R8 Canada
[email protected]
604–877–7663
24
MAKING A DIFFERENCE: CREDIT UNIONS REACHING OUT
VIGNETTE
4:
CREDIT
UNIONs
OF
EL
PASO
AHCUSO— A Credit Union Approach to Affordable Housing
BACKGROUND
“There’s no place like home” are the magic words
For millions of lower income Americans,
the magic of home ownership remains
elusive. In El Paso, eight credit unions
are cooperating to reach out to the
underserved, bring them into the financial
mainstream and realize the American
Dream of home ownership.
Dorothy spoke to return to Kansas from her adventure in
The Wizard of Oz. But for millions of lower income
consumers, the magic of home ownership remains
elusive. In El Paso, eight credit unions are cooperating
to reach out to the underserved, bringing them into the
financial mainstream and realize the American Dream
of home ownership.
In 1999, the National Credit Union Foundation
approached the Texas Credit Union Foundation to
determine interest in an affordable housing program in
El Paso. El Paso County is a community of 700,000
inhabitants located in the westernmost part of Texas. According to TCUF Executive Director Elaine Laroa, NCUF had a
Ford Foundation grant available to commission a feasibility study that would show whether or not offering affordable
housing in El Paso would be a good business venture. Following discussion with the chapter officers of El Paso’s R.C.
Morgan Chapter, the grant was accepted by TCUF. New Mexico State University conducted the feasibility study and
released it in December 1999.
Results of the feasibility study showed great potential for an affordable housing program, Laroa notes. The study
determined that a market exists of 19,350 potential homeowners in El Paso who have not purchased a home
because they do not qualify for conventional mortgages. These potential homeowners are renters with incomes of
$15,000 to $21,000, which is 50 percent to 80 percent of the median income for the area. The study concluded that
the households identified as potential homeowners have the ability to service a mortgage between $41,000 and
$55,000. For this group, the impediment for home ownership is not level of income, but rather non-traditional sources
of income, debt, credit issues and lack of down payment.
To address these issues, the El Paso Affordable Housing Credit Union Service Organization (AHCUSO) was formed
by eight of the 13 credit unions in the chapter:
• El Paso Area Teachers Federal Credit Union
• Golden Key Federal Credit Union
• El Paso Bell Federal Credit Union
• Government Employees Credit Union of El Paso
• El Paso Employees Federal Credit Union
• Mountain Star Federal Credit Union
• Fort Bliss Federal Credit Union
• West Texas Credit Union
Together, these credit unions have about 400,000 members and more than $2 billion in assets and fields of
membership that encompass the entire community. Each contributed $5,000 to form AHCUSO. According to Laroa,
NCUF provided a three-year grant for a total of $225,000: $100,000 in year one, $75,000 in year two and $50,000 year
three. The Texas Credit Union Foundation made a three-year grant commitment to match 25 percent of that amount
or a $56,250 grant over three years.
25
With eight credit unions participating in the venture,
specialized loan products, many of these iniquities
the risk was spread out. But “to make it (the CUSO)
and injustices would be avoided by the informed
work, we knew we needed to hire the right CEO,”
consumer,” he noted.
says Harriet May, president/CEO of GECU. The CUSO
By promoting financial literacy, savings and
Board chose Larry Garcia to serve as its president,
providing access to capital, AHCUSO seeks to
because he not only had experience as a mortgage
empower members of the underserved community
banker broker, and therefore knew and understood
with the ability to develop wealth, economic and
mortgages, but also had a burning interest in afford-
financial stability. Its financial literacy education and
able housing programs, May says.
credit management programs and its specially
developed loan products and financial services
Outside the Mainstream
serve to help members to not only qualify for a
mortgage loan, but also build wealth and credit
Approximately 85 percent of the El Paso population
worthiness.
is Latino and the community has some of the lowest
household incomes in the nation. In his August 2004
AHCUSO has undertaken the following to fulfill its
testimony before the House Committee on Border
mission:
and International Affairs, Garcia cited a 2002 study
• Developed a free comprehensive bilingual
by the Center for Community Change that found El
Financial Literacy and Homeownership Course;
Paso has the highest percentage of subprime loans
in the country, and a report from the Texas Low
• Developed a countywide delivery infrastructure
Income Housing Information Service that stated that
for workshops, most of which are in Spanish;
more than 60 percent of the home refinances in El
• Provided financial education to more than 3,300
Paso were subprime. “The average subprime market
enrollees;
share in Texas is 20 percent. This is a great disparity,”
Garcia testified, “and according to the Fannie Mae
• Established an El Paso Saves social marketing
Foundation, half of these subprime mortgages would
campaign to encourage savings;
have qualified for a lower cost mortgage.”
• Partnered with area school systems and housing
According to Garcia, about 80,000 people inhabit
organizations to provide financial literacy and
Colonias within El Paso County, many living in third
translated the NEFE High School Financial Literacy
world conditions. They don’t have access to conven-
Course into Spanish;
tional financing for a home because conditions do
• Developed a housing counseling system in
not meet national standards. Most of these inhabi-
partnership with HUD and Fannie Mae;
tants are unbanked and do not use mainstream
credit. “They use the ubiquitous small loan finance
• Developed an asset building program using
companies for all their financial and remittance
Earned Income Tax Credits and Child Tax Credits
needs,” Garcia told the committee. “We believe
as a funding base;
that the underlying cause of most of this iniquity is
• Together with its member credit unions, opened
lack of information about family financial planning,
more than 6,000 first accounts; and
credit management and about how our credit
system works.” Garcia cited the inability to access
• Developed niche mortgage loan products with
financial and housing counseling, language barriers
various partners, including three innovative
or no financial institutions located within the under-
housing programs for the Colonias, resulting in
served areas as the primary reasons these consumers
some 80 low income families in homes through
remain unbanked. “We believe that through aggres-
these various programs. (AHCUSO made $4
sive outreach, comprehensive financial literacy and
million in mortgages leveraged to $5.5 million with
homeownership education and development of
partner lenders.)
26
Keeping the Light Lit
Financial and homeownership education is the
foundation for all these initiatives, according to
Garcia, and none of these programs would work
When AHCUSO was launched, Garcia visited
without this base. “Financial literacy and credit
Vermont to gather best practices from a similar
management is a life skill that is desperately needed
affordable housing effort in that state. May credits
by our community and is not formally taught
Garcia for working hard to develop the relationships
anywhere except by programs such as ours or the
with foundations and agencies while at the same
hard knocks of life.”
time running the CUSO’s daily operations. To keep
the AHCUSO sustained requires knowing which
Education, credit management and counseling are
foundations and agencies have funding available
not only the keys to qualifying and purchasing a
and then securing the dollars, May says. “He’s talked
home, but also for keeping the home. Families must
to a lot of people and has come up with many
be educated and counseled in planning for unfore-
creative ideas.”
seen financial catastrophes. “We heavily promote
savings as the best method to cope with these
AHCUSO’s numerous partners include the National
disasters,” Garcia says.
Credit Union Foundation, the Texas Credit Union
Foundation, El Paso Empowerment Zone, the
A Delicate Balance
Housing Authority of the City of El Paso, the City of
While saving is encouraged, the fact that any
Endowment for Financial Education, and Fannie
El Paso, the Southwest EITC Coalition, the National
Mae. Examples of programs include:
savings that lower-income families undertake may
disqualify their eligibility to government assistance
• An experimental mortgage product developed
programs— such as Supplemental Security Income,
with Fannie Mae—AHCUSO makes a first lien
food stamps, or Medicaid—is taken into account.
mortgage loan and HOPE VI and Empowerment
AHCUSO’s financial literacy program also teaches
Zone funds available from Fannie Mae and the
families options in accessing capital and their rights
Housing Authority of the City of El Paso were used
as consumers.
as a second lien and for down payment
assistance.
Garcia believes education is the best way to
combat predatory lending. “We serve this financially
• A mortgage lease/purchase loan program
underserved segment of our community by outreach
developed in conjunction with Fannie Mae, Rural
and staying in touch to the services that they need.
Development Finance Corporation and Artemis
Through financial literacy and other initiatives, we
Builders, in which credit impaired renter/borrowers
empower our community with knowledge about the
enter into a lease/purchase agreement, with up
mainstream financial services available to them,
to two years to achieve certain goals. If they are
which will prevent them from going to the payday
successful, and payments are on time, they will
lenders and check cashing outlets to get these
fully assume the loan and title for the leased
services for excessive fees. We teach our enrollees
home.
where to obtain reasonable and mainstream
services such as inexpensive check cashing, signa-
• Loans made in partnership with Fannie Me and
ture loans, wire transfers, money orders, free notary
El Paso Empowerment Zone with relaxed
services, counseling and financial literacy,”
underwriting guidelines and down payment
according to Garcia.
assistance up to $5,000. Loan has a unique
structure: 20-year full amortization, 98 percent
Notes Laroa, “The fact that so many folks are being
loan to value, no private mortgage insurance,
exposed to basic consumer financial education is in
and a low effective interest rate.
itself the success story.”
27
• Home purchase program in partnership with
Fannie Mae, with relaxed underwriting guidelines
Fannie Mae and the Housing Authority of the City
and down payment assistance up to $20.500, 75
of El Paso for recipients of Section 8 HUD Housing
percent loan to value, no private mortgage
Assistance Payment vouchers. Loans are
insurance, and a market interest rate.
conventional market rates.
While AHCUSO has been successful in turning those
• One Colonia program in partnership with El Paso
who would otherwise be permanent renters into
Community College, Fannie Mae, and Sparks
home owners, it must rely on outside funding to
Housing Development Corp., to replace
remain solvent. May explains that when it was first
dilapidated mobile homes in the Colonia of
established AHCUSO was set it up as a limited liability
Sparks. The construction class for El Paso
company and not as a non-profit entity, “Because
Community College built new homes. There were
as credit unions that’s the business model we were
relaxed underwriting guidelines, a 75 percent loan
familiar with. Seeking funds from foundations has not
to value, no private mortgage insurance, and a
been our normal focus.” To facilitate the funding
market interest rate.
process, AHCUSO pursued and received a charitable 50l(c)(3) status. May advises others looking to
• Two Colonia programs in the areas of Tornillo and
address the issue of affordable housing to do the
San Elizario Texas to replace dilapidated mobile
same. “Dream big, keep the faith, but have a sound
homes with brick veneer new construction homes,
business plan,” she says.
in partnership with the El Paso Empowerment
Zone, HUD, the University of Texas-El Paso, and
Contact Information
For more information on the AHCUSO outreach experience, contact:
Larry Garcia
President
El Paso Affordable Housing Credit Union Service Organization
[email protected]
915–838–9608
28
MAKING A DIFFERENCE: CREDIT UNIONS REACHING OUT
VIGNETTE
5:
TULIP
CREDIT
UNION
TULIP Credit Union:
Partnerships Help Sprout a New Credit Union
Eddie Cantor, star of stage and screen in the early part of the 20th century, once observed that it takes 20 years to
become an overnight success. And while it took less than 20 years to open the doors at TULIP Credit Union in
Olympia, Wash., the idea for a community development credit union to serve low-income consumers in Thurston
County “simmered in the stew” for many years, notes Lorie McMasters, one of the early advocates. McMasters and
colleague Mike Dunn were staff members of $5.1 billion
Boeing Employees Credit Union, with 391,407 members, at
Getting TULIP from an idea to reality
was largely based on the International
Credit Union Principle of “cooperation
among cooperatives.”
the time the idea first surfaced in 1997. TULIP—the Thurston
Union of Low Income People—received its charter in
October 2003, and opened its doors in December 2003.
TULIP’s field of membership includes low-income
residents of Thurston County and members of the Olympia
Food Co-op. Low income is defined as earning 80 percent
of the national median income, or no more than $34,514.
The credit union currently has 450 members and $2 million in assets and has an office in the east Olympia Food Coop. Its Web site is www.tulipcu.coop.
From Ideals to Real
Getting TULIP from an idea to reality was largely based on the International Credit Union Principle of “cooperation
among cooperatives.” The three primary partners were the Olympia Food Co-op, which provided space and
donated employee staff time; BECU, which donated employees, equipment, technical support and financial
resources, and Washington State Employees Credit Union, which provided a business plan, pro forma statements,
accounting, data processing, technical and human resources support. The first full-time manager was a WSECU
employee.
WSECU ($1.1 billion in assets, 128,489 members) serves state, city, county and K-12 employees and their families.
According to WSECU President/CEO Kevin Foster-Keddie, WSECU’s outreach program has two elements: financial
education and helping smaller credit unions, with assistance to TULIP falling in the latter category. WSECU fulfills both
a philosophic and business purpose with these efforts in that its CUSO provides medium and smaller credit unions
with a variety of services including investment sales support, mortgage services and payday lending.
Foster-Keddie has had a long-term interest in community development credit unions, having previously been
involved with South Central Peoples’ Federal Credit Union in Los Angeles, among others. Members of WSECU’s also
were supportive of the effort, and the partnership with TULIP was made a top business priority. “We only have five to
seven top priorities at any one time, so this gave it quite a bit of internal visibility among staff,” Foster-Keddie says.
According to Dunn, who is one of the founders and is currently TULIP’s chairman, BECU’s President/CEO Gary
Oakland also championed the project throughout. “It was a matter of ‘do whatever you need to do’,” Dunn says.
The credit union also received support from Development Educators from across the country. The DE program
provides a network of individuals passionate about credit union philosophy, and when the call went out from
McMasters and Dunn for furniture and equipment, donations flooded in. “Some of the computer equipment was
brand new,” McMasters recalls. The response was so positive, in fact, that some of the goods had to be sent back.
The primary leadership came from the community, however. To successfully serve the community, the credit union
needed to come from the grassroots, and to fit the culture of the community, not that of other credit unions,
McMasters says.
29
The credit union organizing guides available from
surprises that popped up along the way. For example,
the National Credit Union Administration and the
after the business plan was approved and the
National Federation of Community Development
organizing group thought all that needed to be
Credit Unions were helpful, from a high level, Dunn
done was done, the regulator asked for three years
notes. There was so much to do, but no one knew
of working capital, funds that were not previously
exactly how to do it. “It was tough trying to get our
required. To fill the gap, BECU wrote a check for
arms around it,” he says. Decisions were made by
$200,000, and committed to another $50,000 if
consensus management; the organizers wanted
needed during the first three years of operation, a
everyone to have a voice as well as prove that this
commitment it recently honored at TULIP’s request.
style of decision making was a viable option.
The BECU gift was in addition to its $100,000
Eventually the project gained focus, and the
nonmember deposit, part of the $1.6 million in
momentum started building. “Then it was like a train
nonmember deposits TULIP garnered. Foster-Keddie
on a track, and impossible to stop,” Dunn reports.
estimates that WSECU invested well over $100,000 in
direct and indirect costs.
Based on his previous experiences, Foster-Keddie
had a number of criteria surrounding the business
In the heyday of credit union organizing in the 1930s,
plan, and made these issues a priority. These
small groups of individuals could pool $5 or $10, and
included having an anchor group with deep roots in
even though growth at most credit unions was slow
the community and viable leadership and a strong
at first, the organizers’ investment of $50 or $100 was
focus on building a loan portfolio. To generate
enough to launch the credit union. In today’s regula-
income, Foster-Keddie is advising TULIP to consider
tory environment, that model is no longer viable.
low-cost payday lending. “TULIP needs to find a
“Building a business plan was a huge issue,” Foster-
niche, develop a revenue stream and attain
Keddie says. “The other was recruitment: Finding the
business stability as quickly as possible.”
right people with the right skills at the right price.”
TULIP and WSECU have a formal three-year agreement in place. “Starting a credit union is not an
Lessons Learned
easy thing to do,” says Darlene Morales, who has
served as TULIP’s manager since June 2004. “The
At this time, the credit union does not provide cash
expertise and capital infusion provided by the partners
services. Its “teller” is a BECU ATM located in the co-
is the reason we are able to function as we do.”
op, and available during the co-op’s business hours.
TULIP members are also eligible to use any of the
Overcoming Barriers
ATMs in BECU’s and WSECU’s network surcharge-free.
TULIP is slowly taking over more and more functions
The biggest hurdle for the credit union was regula-
with the goal of becoming self sufficient, but there is
tory approval. The regulators were not unsupportive,
no margin for error. If something costs $50 more than
and were, in fact, enthusiastic about the project.
expected, that has to be made up somewhere else,
“We have great relations with the regulator—many,
Dunn notes. That means there must be absolute
if not most— are our members!” says Foster-Keddie,
attention to details, he says. “And there is a tremen-
“and we were able to walk through the issues based
dous emotional pressure to succeed.”
on trust.” But because of the long drought of credit
union charters, there was not one person still on the
When the credit union first opened, the average
staff from the last time a credit union was chartered
loan amount was $800; the average loan is now
in the State of Washington, Dunn notes. “The regula-
$1,300, but it still takes a lot of loans to produce the
tors were key partners, and they went out of their
necessary income. Dunn believes that higher
way to make TULIP happen,” he says. “But they were
balance loans need to be in the mix, and is looking
not sure just how to do it.” That meant there were
toward more business from the members of the
30
Olympic Food Co-op, to help sustain the credit
credit union opened its doors. “For one year, there
union. “To maintain our CDCU-status, 51 percent of
was a surprise a month,” Dunn says. Partnerships
our members must meet the low-income test,” he
were key. “This is not something you can do by
says. But gaining some of the 13,000 members of the
yourself,” he says. Adds Morales: “Big things are not
Olympic Food Co-op as TULIP members—and their
accomplished easily.”
car loans, for example—to make up the remaining
For its part, the partnership with TULIP has enhanced
49 percent will save the day, Dunn says.
WSECU’s reputation in the community. Notes Foster-
Another issue for the credit union is the burden of
Keddie: “Our payoff from a public relations stand-
regulatory compliance. Being subject to the same
point has been huge. I have members walking up to
requirements as credit unions many, many times its
me at the gym, in the grocery store, at the cleaners,
size consumes scarce resources—staff time and
telling me how proud they are that we are
money. For example, the cost of a federally
involved,” he says. Foster-Keddie cites the credit
mandated outside risk-based system audit would
union’s Bain Consulting “Net Promoter” survey score
have run into thousands of dollars, Morales points
of 83 percent. That figure is in the 99th percentile for
out, and if WSECU had not stepped in and negoti-
all North American companies. For comparison,
ated it pro bono from one of its outside consultants,
Southwest Airlines is 60 percent and Dell is 40
the cost would have been prohibitive. “I don’t think
percent, numbers that are considered good ratings
the regulators have any idea of the price tag of
as the average score is 11 percent. The “Net
what they are requiring,” Morales says. Preparing for
Promoter” score measures the number of promoters
an examination took some 40 hours out of Morales’
an organization has minus the number of detractors,
already time-crunched schedule.
and Bain has found a correlation between a high
score and a company’s profit and growth. For more
The lack of knowledge about what to do during the
information, visit www.bain.com.
organizing and chartering process and the resulting
steep learning curve contributed to volunteer
“Our brand satisfaction rating this past quarter was
burnout and turnover. “Knowing what we know now,
97 percent,” Foster-Keddie says. Initiatives like the
we could probably cut off four years in the process,”
partnership with TULIP promote this kind of loyalty, he
Dunn says. A more streamlined process would also
believes. “At credit unions, it is important to stand for
help eliminate some of the “uh-ohs” that popped up
something,” Foster-Keddie emphasizes, “and, it is
during the organizing phase as well as when the
very good for business.”
Contact Information
For more information on the TULIP Cooperative CU experience, contact:
Darlene Morales
Kevin Foster-Keddie
Manager
President/CEO
TULIP Cooperative Credit Union
Washington State Employees Credit Union
3111 Pacific Avenue
P.O. Box WSECU
Olympia, WA
Olympia, WA 98507
[email protected]
[email protected]
360–956–9235
360–943–7911
Mike Dunn
[email protected]
425–488–4874
31
PART 3
COMMON ELEMENTS
OF SUCCESS
The foregoing vignettes are just some of the programs credit unions
have undertaken to reach out to underserved populations. Although
they differ in detail, progress and scope, many common elements
can be seen in the execution of these initiatives. Following are some
of the key elements necessary to produce a program that serves
underserved populations while serving the business needs of the credit
union that undertakes it.
Know the Population You Wish to Serve
To attract and serve residents of an underserved community, credit
unions need to understand not only the demographics of their area
but the cultural and ethnic mores of the population. The California
Credit Union League reports an anecdote that illustrates this point.8
The league hosted representatives of the El Salvador Credit Union
Federation, and the two groups were trying to establish a link from a
specific area in California to El Salvador. The California credit union
involved assured the league repeatedly that it had no Salvadorans in
its field of membership or on its staff. At the same time, the demographics
told league staff that Salvadorans had to be in the area and on
This example illustrates the importance of
the credit union’s membership rolls. When Salvadoran federation
studying the marketplace and
representatives took a tour of the credit union office, one of the
new accounts people said: “You’re from El Salvador, aren’t you?”
avoiding assumptions regarding the
She was Salvadoran, and reported that there were many
character and ethnicity of the credit
Salvadorans in the area, including an entire church parish just
union’s field of membership,
down the street.
particularly if the credit union has a
This example illustrates the importance of studying the marketplace
and avoiding assumptions regarding the character and ethnicity of
community charter.
the credit union’s field of membership, particularly if the credit
union has a community charter. The California Credit Union League
found that credit unions that have been successful in serving
immigrant populations are those that have taken the time to get to
know their marketplace.
As we saw in the SCE FCU case study, although half the population of
California is Hispanic, that population cannot be regarded as homogenous. It is comprised of native-born citizens as well as immigrants
8
Serving New Americans: A Strategic Opportunity for Credit Unions,
Filene Research Institute, 2003
32
PART 3 Common Elements of Success
from South and Central America, Mexico, Cuba, the
serve them in their own language. We soon added
Caribbean, and other home countries. Each of these
two more people who spoke the language,
populations has its own culture and traditions, and
including one woman who has a degree in finance
varies with respect to financial knowledge, occupa-
from Sarajevo. We now serve 70–80 percent of
tion, age, wealth, citizenship status and other
Bosnian households in our county.”
factors. And just as credit unions segment member-
VanCity’s Peer Lending program also illustrates the
ship groups in other ways, they need to segment
value of speaking the same language—not only in a
their members in terms of ethnicity and national
linguistic sense, but also the help gained from talking
origin as well.
to others engaged in a similar enterprise. Members
The organization of TULIP CU was an organic effort,
have a built-in set of business advisors with whom
and although the support of its partner credit unions
they can test ideas and seek solutions to common
was essential to its formation, the primary motivation
problems.
for financial services had to grow from the community. “We had to understand the culture and how
Seek Out Effective Partners
the credit union would fit into the community,” notes
early advocate Lorie McMasters.
Among the vignette credit unions reported in this
volume, effective partnering may be the most
Speak to that population in their language. The most
important element of success. In developing an
obvious application of this advice is, of course, to
outreach program, the credit union needs to under-
employ front line staff fluent in the appropriate
stand that prospective members in a target popula-
language to communicate with non-English-
tion may be unaware of the kinds of services credit
speaking member populations, whether those
unions can provide, and may even have a negative
populations are Hispanic, eastern European, Asian or
view of traditional financial providers. Immigrants
other ethnic groups. But the mandate goes much
and other populations may have experienced poor
further. Printed marketing and loan materials as well
service and/or usurious fees in dealing with financial
as disclosure documents must be available in
institutions elsewhere, and be skeptical of dealing
members’ native language, and credit union staff
with a credit union here.
must know not just conversational language but
business terms as well. In El Paso, educational
Often, the most trusted organizations in the lives of
materials, including the comprehensive NEFE High
underserved populations are the social service
School Financial Literacy course, were translated into
agencies that attend to their needs. The SSA
Spanish in order to build a base of money manage-
Baltimore FCU management and board, for
ment know how necessary for home ownership.
example, could be confident that a branch in the
Among Hispanic populations, colloquial and
underserved southwest part of the city could
idiomatic language may differ considerably
succeed because Operation ReachOut Southwest
depending upon the members’ country of origin.
had done its homework with respect to identifying
Gwinnett Federal Credit Union serves employees of
It was the partnerships with Operation ReachOut
potential users, and was eager to establish a branch.
four school systems and more than 50 small and
Southwest, other community agencies, local political
medium SEGs in a three-county area northeast of
authorities and others that assured the success of
Atlanta. The credit union’s field of membership
Our Money Place.
includes a community of Bosnian immigrants. “As our
Partners also bring resources that help the credit
population of Bosnian members increased,” says
union educate its members in the basics of smart
Gwinnett FCU President/ CEO Marshall Boutwell, “we
money management and financial literacy. An
realized that we needed help with language. At first,
alliance with the local Consumer Credit Counseling
friends and family served as interpreters, but it soon
Service can help members build or repair damaged
became apparent that we needed staff who could
credit. Even credit reporting bureaus have instituted
33
programs designed to help consumers improve their
teer retention is important, there is always a need for
financial skills. Education plays a vital role in trans-
volunteer recruitment, too.
forming renters into homeowners in El Paso.
AHCUSO’s partnerships with the Texas Credit Union
Demonstrate Commitment from
the Top Down
Foundation, the National Credit Union Foundation,
Fannie Mae and others provided the resources
needed to not only educate consumers but also
To succeed, new programs require strong and
continuous support of top-level people within the
organization. Endorsement of the program by the
CEO, the board and the executive staff must be
reinforced regularly through internal communications
channels and commitment of financial and human
resources to the project. In each of the vignettes
presented in this volume, commitment began at the
highest levels of the organization, and was communicated throughout the credit union to assure
employees that the outreach program was a corporate priority.
develop mortgage products that fit the specific
circumstances of its market. As we learned in the
introduction to this volume, Fair Isaac Credit Services
has introduced a new credit risk score, the FICO
Expansion Score, designed specifically to help
lenders extend credit to consumers in new markets.
Because it is based on non-traditional credit data, it
can effectively predict risk for the growing number
of U.S. consumers that fail to receive a traditional
FICO score due to non-existent or “thin” credit histories.
Be Patient
SCE FCU’s George Poitou reminds us that in order to
succeed, the credit union must give strategic focus
to these initiatives and not be an afterthought. It
takes commitment from top to bottom within the
organization. The partnership with TULIP CU, for
example, was a one of a few top business priorities
for WSECU.
Allow time for the program to succeed. “Rome
wasn’t built in a day,” the old adage goes. Neither
was a credit union’s reputation and credibility. For
most credit unions, it took decades to build an
image of financial strength and consumer interest
among their current membership. In reaching out to
And while the development of an outreach program
depends first upon the intentions and behavior of
those at the top, an effective program also relies
upon the involvement and commitment of
employees at all levels. To achieve that goal, the
program must be carried through all levels of the
organization. That means that communication must
be continuous; those in leadership positions must
consistently send the message that the outreach
efforts are a key part of the credit union’s mission
and, therefore, a key element of job performance.
With turnover, there is always the possibility that information will slip through the cracks. For example, a
front line employee who is not aware that the credit
union is in partnership with another may inadvertently turn away or refuse assistance to the partner
credit union’s members.
new populations, the credit union must understand
that it is embarking upon a journey of some length.
Potential members in underserved populations are
likely to be unfamiliar with the services the credit
union can render to them, and may not even know
what a credit union is and how it differs from forprofit institutions. All this requires communication on
a regular basis, from the credit union itself and
through its partnering organizations in the outreach
initiative. SSA Baltimore’s Kevin Roland advises:
“There are no quick answers. With experience, the
credit union can adjust its operation to suit the
particular needs of the population it wishes to serve.
Profitability is perhaps a two- to three-year time
horizon. If we offer products that appeal to underserved individuals, we will win their business.”
Regular communication helps keep volunteers
Employee participation in an effective outreach
involved, but it may be too much to expect that
program produces several important effects. These
everyone involved at the start will stay the course.
results add up to a stronger organization and
People lose interest, burn out, move on. While volun-
improved performance. As employees join in discus-
34
PART 3 Common Elements of Success
sions of organizational values and goals, they come
the proceeds at the start of the loan period, they
to understand what the program means to the credit
get the proceeds at the end of that period. The
union, and how it relates to the overall enterprise.
credit union also offers an emergency loan program
through which members can apply for a $300 loan
Establish a Physical Location
designed to help them in difficult circumstances.
Credit unions that have undertaken outreach
product tailored specifically for SSA Baltimore FCU’s
programs strongly recommend creating a bricks-
underserved community. IDAs reward the monthly
and-mortar location to serve the targeted popula-
savings of people who are trying to buy their first
tion. Experience indicates that an ATM or cash
home, pay for college or start or expand a small
dispenser alone is not sufficient to build the kind of
business. In El Paso, the AHCUSO worked closely with
trust and confidence necessary to make a success
Fannie Mae and others to design mortgage
of an outreach effort. If possible, the credit union
products that would overcome common credit
should join with community partner agencies in
approval obstacles such as debt ratios, down
placing its branch location. TULIP CU’s office within
payments or nonstandard housing.
Individual Development Accounts (IDAs) are another
the Olympia Food Co-op allows the credit union a
Strike a Balance Between the
Needs of the Underserved
Population and the Needs
of the Credit Union
physical presence in the community while at the
same time an ATM provides its cash services. The
Food Co-op’s donation of the space enables TULIP
to rein in a key expense line item. Initially, the Food
Co-op also provided rent-free downtown office
space to the organizers.
Credit unions were created and built on the princi-
In the case of SCE FCU, every organization with
ples of service to people of modest means.
offices in the building where the credit union branch
Reaching out to populations that need a hand up is
is located is a non profit or government office with
a credit union tradition. At the same time, directors
ties to the population served by the credit union. A
and senior management need to fulfill their fiduciary
council member for the city has offices in the building.
responsibilities to existing members, and provide a
The SSA Baltimore initiative is also located in the
safe and secure place for members to conduct their
same space as community service agency Operation
financial affairs.
ReachOut Southwest, which has an asset coordi-
These two mandates need not be mutually exclu-
nator position on its staff. There is also an official
sive. The success of VanCity clearly demonstrates
“greeter” at the facility, to explain to consumers how
the viability of a commitment to community and
to use the various services available there.
social responsibility and a business case for “doing
well by doing good.” In case after case, a credit
Tailor Products and Services to
Meet the Needs of the
Population You Wish to Serve
union’s outreach program was precipitated by a
need to reinvigorate its membership while
maintaining top quality service to existing members.
Just as an invitation to newly enfranchised member
Products appropriate for the existing members of a
populations through SEG recruitment or conversion
mainstream credit union—such as investment
to a community charter offers benefits to all
vehicles, trust services and jumbo mortgage loans—
members, reaching out to serve individuals of
may not be right for underserved population. SSA
modest means can enhance the membership
Baltimore FCU, for example, offers a Wealth Builder
experience for everyone.
loan that helps to build or re-establish credit. The
$2,000 loan is a kind of savings account to which
members make payments, and instead of getting
35
PART 4
FURTHER RESOURCES
AVAILABLE
Future CUES Activities
DOCUMENTATION OF NATIONAL FEDERATION OF COMMUNITY
DEVELOPMENT CREDIT UNIONS (NFCDCU) BRIDGE GRANT AWARDS
CUES has received a grant from the Ford Foundation to evaluate
recent recipients of NFCDCU Bridge Grants. The Bridge Grant
program, also funded by the Ford Foundation, seeks to increase financial services to underserved populations by melding the scale and
reach of larger, mainstream credit unions with the specialized community knowledge of typically smaller community development credit
unions (CDCUs). CUES will monitor these projects from set up to implementation and beyond, document their accomplishments and make
the results available on a complimentary basis to credit unions. The
data offered in this publication and the Bridge Grant evaluations is
designed to help mainstream credit unions initiate outreach projects.
Partnership Resources
National Federation of Community Development Credit Unions
Partners Program: The Federation’s Community Development Partner
membership is open to any mainstream credit union with a strong
demonstrated commitment to serving low- and moderate-income
people and communities. In recent years, more mainstream credit
unions have expanded their field of memberships to include underserved communities. Many of the Federation’s Community
Development Partners have opened new branches in low-income
areas, offered services to immigrants, are helping people with credit
repair or to get a first loan, offer alternatives to “payday” loans,
financing affordable housing, and are assisting a local CDCU. Some
credit unions have recently received field of membership expansion
into an underserved area and affiliate with NFCDCU to expand their
knowledge on developing products, programs and services to best
service members in these communities. (www.natfed.org)
Self-Help: Self-Help is a community development lender that has
provided over $3.5 billion in financing to 40,000 home buyers, small
businesses and nonprofits. Self-Help reaches people who are underserved by conventional lenders—particularly minorities, women, rural
residents and low-wealth families—through the support of socially-
36
PART 4 Further Resources Available
responsible citizens and institutions across the U.S.
Effective, Asset-building and Loyalty-producing—
(www.self-help.org)
were field tested in a pilot program involving 19
credit unions during 2002–2004. The program
International Remittance Network Service (IRnet):
provides guidance, business models, training,
IRnet is an electronic funds transfer service operated
products and services to credit unions to attract,
by the World Council of Credit Unions that provides
engage and serve low-wealth households. REAL
credit union members a safe and inexpensive way
Solutions encourages credit unions to understand
to send money overseas or domestically. IRnet
and facilitate the path to financial growth for
provides service to over 40 countries in Latin
targeted members. (www.filene.org)
America, Asia, Africa and Europe, and people can
receive money at over 3,000 locations in 36 U.S.
CUNA Hispanic Outreach Task Force: This group has
states. (www.woccu.org)
made recommendations to the CUNA Board about
what the organization can do to encourage credit
National Credit Union Administration (NCUA): The
unions to serve the Hispanic market; and to increase
NCUA’s Access Across America program partners
awareness of credit unions within the Hispanic
with key federal departments and agencies in
community. One initiative is a Hispanic Resource
developing solid opportunities to aid communities
Center to be housed on the CUNA Web site as a
with the resources and technical assistance to serve
central information repository for credit unions and
provide financial services, affordable housing and
consumers. There will also be a Listserv that inter-
economic development opportunities. For credit
ested credit unions can join in order to share infor-
unions, it provides the authority through which
mation or request information from others. To sign
outreach programs to underserved communities can
up for the Listserv, go to the Resource Center at
be realized. The NCUA’s Partnering and Leadership
(http://www.cuna.org/initiatives/hispanic/index.html)
Success (PALS) program encourages credit unions to
share innovations to improve member service and
Research Resources
reach everyone in their field of membership. PALS
helps turn potential members into actual members,
Filene Research Institute: Filene has sponsored a
and helps credit unions make a difference in their
communities. (www.ncua.gov)
number of research projects that explore the poten-
National Credit Union Foundation (NCUF): The NCUF’s
tions. Among these reports are several by Professor
First Accounts program administers nearly $1.4 million
John P. Caskey of Swarthmore College, one of
from the U.S. Treasury Department to fund initiatives
America’s top experts on the alternative financial
aimed at providing low-cost financial services to
sector. (www.filene.org)
tial for serving low-income and underserved popula-
unbanked low- and moderate-income individuals.
Brookings Institution: The Brookings Institution’s
The Foundation’s Affordable Mortgage Lending
Capital Xchange is an online journal about trans-
program gives people of lesser means and those
forming financial markets and transforming places.
experiencing other forms of financial hardship
The publication is sponsored by Brookings Center on
access to affordable mortgage lending services. The
Urban and Metropolitan Policy, and the Joint Center
social mission of credit unions makes them the ideal
for Housing Studies of Harvard University.
vehicle for helping financially-challenged consumers
move from the dream of home ownership to the
(www. brook.edu/es/urban/capitalxchange)
reality of home ownership. (www.ncuf.coop)
Woodstock Institute: The Woodstock Institute
Filene Research Institute: Filene’s REAL Solutions
promotes community reinvestment and economic
development in low-income and minority communi-
program offers assistance to reach out to low-
ties. Woodstock partners with community organiza-
wealth individuals, building a bridge from transac-
tions, local and national economic justice coalitions,
tion services to other offerings that can follow.
academics, policy makers, financial institutions and
Filenes’s REAL Solutions program—Relevant,
37
foundations. The Institute’s activities include policy
Fannie Mae Foundation: The Fannie Mae
analysis, community economic and credit needs
Foundation creates affordable homeownership
analysis, program design and evaluation, analysis of
and housing opportunities through innovative
lending data, technical assistance for neighborhood
partnerships and initiatives that build healthy,
development and community reinvestment negotia-
vibrant communities across the United States.
tions. (www.woodstockinst.org)
(www.fanniemaefoundation.org)
Center for Responsible Lending (CRL): The Center for
Vendor Resources
Responsible Lending is dedicated to stopping financial abuses through legislative and policy advocacy,
D2D Fund, Inc: Doorways to Dreams Fund works to
coalition-building, litigation and industry research.
expand access to financial services, especially asset
The Center is a unit of the Center for Community
building opportunities, for low-income families by
Self-Help (Self-Help), based in Durham, NC. Self-Help
creating, testing and deploying innovative financial
is one of the nation’s leading community development lenders. (www.responsiblelending.org)
products and services. Online IDA is a Web-based,
Harvard Business School: Harvard’s Peter Tufano is
system designed to help the Individual Development
the Sylvan C. Coleman Professor of Financial
Account (IDA) and asset building fields grow to
Management at the Harvard Business School and a
scale. The Refunds to Assets project provides low-
Senior Associate Dean at the school. In the past few
income tax filers a convenient tool to direct part of
years, Tufano has been studying the delivery of
their federal tax refund to an asset building account.
financial services to the poor. His research focuses
D2D is also pursuing other initiatives where it has an
on how to use financial innovation— developed to
opportunity to advance the asset building field and
serve the rich— to serve the financial service needs
strengthen financial service offerings for low-income
of the poor, especially their need to build assets. He
families. (www.d2dfund.org)
integrated financial transaction and record keeping
is the founder and Chairman of D2D Fund, Inc., a
ShoreBank Center for Financial Services Innovation:
nonprofit that attempts to turn these ideas into
The Center for Financial Services Innovation focuses
practice through businesses and government
on encouraging the development of asset-building
policies. Tufano is the co-lead faculty member of
CUES’ Advanced Leadership Institute.
opportunities that create value for both customers
Ford Foundation, Economic Development Unit: The
resources, enables partnerships, and develops
Economic Development unit seeks to make durable
and distributes authoritative information on how to
economic improvements in the lives of the disadvan-
respond to the needs of the underbanked profitably
taged. Specifically this unit supports organizations
and responsibly. The organization assists pioneering
that help businesses create employment opportuni-
institutions and organizations both large and small to
ties and help low-income people acquire, develop
serve underbanked consumers across the economic,
and maintain savings, investments, businesses,
geographic and cultural spectrum. Banks, credit
homes, land and other assets.
unions, technology vendors, alternative service
(www.fordfound.org/program/economic.cfm)
providers, consumer advocates and policy makers
and companies. CFSI provides funding and
find support here to forge the new relationships,
New America Foundation, Asset Building Program:
products and strategies that will transform industry
The purpose of New America's Asset Building
practice, and people’s lives. (www.cfsinnovation.org)
Program is to significantly broaden the ownership of
assets in America, thereby providing all Americans
National Community Investment Fund (NCIF): The
both with the means to get ahead, and with a direct
NCIF is committed to increase the number and
stake in the overall success of our economy.
capacity of domestic, insured, depository institutions
(www.assetbuilding.org)
that are effective agents of local community development and sound financial institutions. (www.ncif.org)
38
This report was made possible
through the generous support of the
Ford Foundation.
Credit Union Executives Society
P.O. Box 14167
Madison, WI 53708-0167
Phone: 800.252.2664 or 608.271.2664
Fax: 608.441.3346
www.cues.org

making a difference

Transcription

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