Many, if not most, credit unions would balk at the notion of adopting former state prison inmates as potential members. But it should tell you a lot about the 21,000-member $90 million Shreveport Federal Credit Union that the idea met with near universal approval from the first time it was mentioned as a possibility.
That’s because the credit union’s entire staff, from the board chairman to the newest teller, understands and shares a commitment to provide essential financial services to the most underserved of the community. And this commitment is what has made the Shreveport La.-based credit union the winner of the Credit Union Times 2013 award for Outstanding Service to the Underserved.
The seeds for a program providing financial education and, eventually, potential credit union membership to inmates preparing to leave the Louisiana state prison system were first sowed in 2009. The administration of Louisiana Gov. Bobby Jindal began seeking partners in different counties, called parishes in Louisiana, to help expand a financial education program that had already been put into place at the state’s largest penitentiary at Angola, La.
At the time, 20,000 of the state’s prison inmates were serving their sentences in parish jail facilities due to overcrowding at Angola, according to the Jindal administration, and that left them effectively out of reach of programs designed to help them prepare for life after prison. Shreveport’s role in the newly expanding inmate re-entry program was to provide financial education–both in the basic mechanics of a financial life such as how to maintain a checking account and how to evaluate credit expense but also to help inmates better understand and control their relationship with money in advance of their release.
“We want them to have a deeper understanding of money, both how a poor relationship with money led them to prison and how a better relationship with money can keep them from going back,” explained DeAndre Zachery, senior vice president for operations at the credit union. “We cover the essentials of basic financial education as well as touching on money as a tool they can use to achieve their longer term goals,” he added.
Inmates are eligible to take part in the program when they are within 90 days of their release date, Zachery and other credit union staff explained. Although they are not required join the credit union, about 60% of the program’s participating inmates do so upon release.
And while some outside the credit union might have supposed allowing former inmates to become members, open accounts and take out loans might put the credit union’s assets at risk, the credit union reported that with 600 former inmates per year graduating the program, it has yet to have a single incidence of fraud from one of the program graduates.
“We have found that the members who are graduates of the program have a great deal of loyalty to the credit union,” explained Shreveport FCU Senior Vice President Martha Morris. “They understand that the credit union has taken a risk by putting our trust in them and they don’t want to see that undermined.”
She also pointed out that almost all the inmates who take part in the program also have families and that these families also benefitted from the inmates gaining a better understanding of how to make money work for them.
Shreveport FCU CEO Helen Godfrey-Smith reported that the board had been enthusiastic about the program from the first, comprehending from the first that the program could bring financial services and financial education to a population most badly in need of both.
Godfrey-Smith attributed the board’s willingness to volunteer the credit union for the inmate re-entry program to its experience working with a field of membership that is already predominantly lower-income. She also said the credit union’s examiners have been enthusiastic about the program, especially after auditing the program’s first year and seeing how few losses it generated. But she acknowledged she had to initially quiet her own misgivings.
“The idea to do this project required a good deal of thought and quite frankly, prayer,” Godfrey-Smith explained. “The thought of introducing every inmate exiting the corrections system to our institution was daunting. But I simply changed my thoughts from fear to faith.”
So far Shreveport’s risk-taking has been vindicated. In addition to not seeing any fraud and minimal losses from the program, it has also had an impact on individual members. The credit union would not share the name of any former inmate members due to privacy concerns but reported the cases of two in particular they were able to help.
One, a former public official, lost a parent while incarcerated and received a significant inheritance of $250,000. Although he was not yet eligible to participate in the program, he was able to contact the credit union through the program and arrange for an account and for the credit union to help him preserve and manage the funds on behalf of him and his family.
In another case, an inmate was able to use the credit union’s services to manage his assets and income while he was incarcerated so that his family was able to remain supported. Both these former inmates were able to launch businesses after they returned to society and now employ other residents, the credit union staff said.
Godfrey-Smith also pointed to the credit union’s financials as an indication that simply working with lower income populations does not mean that a credit union cannot also perform well financially. Shreveport’s return on assets for September 2012, the last report for which there were peer averages available from the NCUA, stood at 1.81%, significantly higher than the 0.49% peer average. Delinquencies and charge-offs were higher than peer averages, but Godfrey-Smith pointed out they were lower than other community development credit unions.
Godfrey-Smith said that by working with its borrowers, being careful in its underwriting and helping making sure borrowers are adequately prepared for the loans, Shreveport will continue to have sound lending.