For Lower Valley Credit Union, blazing a trail with its work with the underserved has meant really cluing into the lives and needs of most of its members.
“To say that LVCU is sensitive to the realities of our valley would be an understatement,” said LVCU CEO Suzy Fonseca. “We respect the realities and help provide sincere solutions. It's actually very simple: Our member's financial accomplishments are LVCU's financial accomplishments. We are all in this together.”
The $61.3 million, 8,500-member credit union is in Sunnyside, Wash., in the heart of Eastern Washington's agricultural region. More than 88% of LVCU's members qualify as low-income and a significant number make their living primarily in agricultural work, often seasonal or uncertain.
A significant percentage of new members arrive without credit histories and have never had a bank account prior to joining the credit union, according to Josh Beck, vice president of finance at the 2014 CU Times Trailblazer honoree for Service to the Underserved.
“It's a community with some challenges,” Beck said. “A lot of heart, but some challenges, too, and working to help improve their financial situations means mixing education with action. Working with them where they are, we have to almost simultaneously educate our members about how they can better their financial situation and help them do it.”
LVCU feels its responsibility so acutely, Beck explained, because of the unique role it serves in its very rural community. Beck acknowledged that there are bank branches in the area, but stressed that many of those banks tend not to see people like the credit union's members as being very bankable.
LVCU staff starts financial education early.
“It's not that they won't open them an account, they probably would,” Beck said. “But the products and services they offer are likely not going to be the ones that people who are members really need or can afford.” He said just having an account at a bank is not enough to make a person really use the available financial services an account provides.
Data from various banking industry sources and government agencies bear him out. According to BankOn.org, an organization which promotes public/private partnerships to help more consumers establish bank accounts, almost 18% of Sunnyside's households lack bank accounts, double the national average
Further, of the households that are banked, almost 22% still rely on higher-cost check cashers, payday lenders and other non-bank financial services for things they could obtain more cheaply from a financial institution.
This situation is why almost all LVCU members, at some time or other, meet with a credit union representative who can get a better understanding of where they are financially and what they need to start doing to improve their circumstances.
“For many of our members, that means measures to build a credit history and start a savings plan,” Beck said, “because many of their first needs from us our used auto loans.”
Beck explained that due to the area's predominantly rural character, having at least one car in a household is essential to help members commute to work as well as being able to shop, obtain health care or take part in most community or recreational events. That's why a used car loan is the first or one of the first loans that many LVCU members obtain, including the almost 400 so far who did so even though they had little to no credit profile over the past three years.
LVCU charges an average 13.2% interest on its used auto loans to members with lower credit, a number which it notes is 127% lower than the rates charged at many of the area car lots.
The credit union will also make used car loans for as little as $500, helping to make an essential automobile an option for even the poorest of area consumers and credit union members.
The credit union noted that there has been little social science research into the impact used vehicle loans can have, which makes evaluating their importance difficult. But Vehicles for Change, a non-profit organization which collects used cars, rehabilitates them and sells them at affordable prices to lower-income consumers reports that 75% of the families which have purchased the cars since 1999 were able to find better jobs and make better income after the purchase. In addition, 75% reported missing fewer days from work and the household's annual earnings increased by an average of $7,000 per year.
LVCU has also taken pains to make sure its work with lower-income members is sustainable. According to NCUA data for the third quarter of 2013, the most recent quarter for which peer data is available, LVCU's return on average assets stood at 0.76%, well above the peer average of 0.43%.
The credit union's ratio of charged off loans to assets also lags its peers, as do loan delinquencies, but at the same time LVCU's loan growth stood at 7.75% versus 4.24% for its peers.
Beck attributed the low levels of delinquency in its loans to the credit union's willingness to work with its members as well as the gratitude and regard the members have for the credit union. One reason members will strive not to be late with payments on loans is because they don't want anyone among their families and friends, also credit union members, to know that they aren't paying their credit union bills, Beck explained.
In the end, LVCU's willingness to strive and grow alongside its members is what makes the organization stand out among the financial service providers in the area, Beck said. “We will listen and try to help when so many others will not,” he said, remembering one memorable loan LVCU made to help a member cover the costs of adopting a child. “Nobody else was going to help her with this,” he noted. “But we would and did.”