If there were a category of potential credit union members that could be described as beyond unbanked, those would be the people that the Durham, N.C.-based Latino Community Credit Union seeks to serve.
“Many of our members have come from primarily cash-based societies,” said Erika Bell, vice president of strategy and services for Latino Community CU. “Some of them are not just suspicious or mistrustful of banks, they simply don't know them or the services they provide, at all.”
Welcome to the daily challenge that the 54,000-member, $106 million credit union has faced every day since it received its charter from the state of North Carolina in 2000. “Yes, we serve many people who lacked banking services,” Bell said. “But our work is really so much more than that. It's serving people who might not understand that there are financial services available.”
Chartered at first as a public safety solution to the problem of Latinos living in and around Durham from being perceived as easy crime victims (Latinos were stereotyped as carrying a lot of cash and storing cash at home), LCCU has grown into a community development credit union powerhouse, offering not only the usual mix of transaction and remittance services that can sometimes monopolize lower income or primarily immigrant credit unions but also consumer loans, auto loans, credit cards, micro-business and mortgage loans through 10 branches as well as over the Internet and phone.
While LCCU has been successful on this model so far, Bell stressed that the more important work takes place below the levels of product and services, in the basic level of financial education that LCCU wants all of its members to receive. LCCU offers, without charge, a series of workshops that cover the most basic elements of working with a financial institution, including topics like how to manage a checking account and use an ATM, how to save and create a budget, how to build credit history and others.
The workshops are offered weekly to members and to the larger community three times a year in every branch. The CU offers them in the early evening, after regular business hours for the convenience of members and they are also taught off-site at English as a Second Language classes.
The CU will offer new workshops in investing and insurance later this year and will launch an online interactive curriculum to allow for expanded access to workshop topics. LCCU reported that more than 13,140 participants have attended the workshops on budgeting and credit, thereby preparing them to be educated future borrowers at the credit union.
Bell explained that the CU wants to move members along the continuum of financial capability, from using transaction services to deposit accounts to consumer credit and eventually home ownership. LCCU makes the materials available in both Spanish and English to ensure accessibility and help members feel comfortable and all staff is bilingual and bicultural. The staff come from 14 different countries and have shared the immigrant experience themselves, including the challenge of learning to navigate the U.S. financial system, Bell explained.
Much of the CU's work focuses on helping its members start to move along the financial system. Once a basic level of education is obtained, members with no credit history who make up 70% of the CU's members are able to build their credit history with a number of different tools.
One, the Credit Builder loan, is a 24–month, share-secured loan which LCCU secures with the members interest-earning share account. The member makes payments on the loan for 24 months until the loan is repaid, giving the member a credit history and making the money in the share account available again. Other loans available with no credit history include a $500 unsecured loan, an auto loan of $12,000 or less and a share-secured credit card.
The CU also accepts alternative credit histories, such as payment histories on utility bills, as part of its underwriting and encourages them to put their utilities under their name in order to have a record for alternative credit.
The CU reported that, since 2000, more than 6,000 members have established credit through its Credit Builder and other secured loans, and LCCU has been recognized for its work in this area. In 2006, CUNA awarded LCCU the Best Consumer Lending Program award among credit unions under $250 million in assets nationwide for its exemplary work.
A similar attitude characterizes LCCU's approach to housing finance. Most LCCU members faced barriers in getting a mortgage loan from other lenders from their brief U.S. work histories, limited credit histories and short lengths of time in their existing residence. But LCCU requires only 12 months of rent and employment history and offers 90% financing without formal credit history and does not require private mortgage insurance.
LCCU points to its extremely low levels of delinquency, with an average delinquency rate over 60 days of less than 2.6% through November 2011, which the CU attributes to careful underwriting, personal understanding of members and the financial education program.
LCCU opened another dimension in lending in 2010 when it introduced micro-business loans to help serve members who had been hit by the current recession. Many members faced job losses and wanted to start their own small businesses. By providing these much needed products, LCCU will be able to support local entrepreneurship and innovation for a population that has traditionally been left out of the financial mainstream, the CU said.
In addition to the 2006 Best Consumer Lending award, LCCU has won recognition nationally and internationally. In 2010, LCCU won the Community Credit Union of the Year award from CUNA for credit unions under $250 million in assets, as well as the E Pluribus Unum Prize from the Migration Policy Institute recognizing exceptional immigration integration initiatives. Also in 2010, LCCU won second place in the Dora Maxwell Award for Social Responsibility.