BURNSVILLE, Minn. – While bankers continue to question and raise doubts about whether credit unions are fulfilling their mission, U.S. Federal Credit Union is letting its actions speak volumes. The $597 million credit union has teamed up with AccountAbility Minnesota, a local nonprofit organization that provides free tax assistance to low-wage consumers, to offer a credit union alternative to Refund Anticipation Loans, called Express Refund. "This is very simply the right thing to do," said US Federal CU CEO Bill Raker. "Refund Anticipation Loans take full advantage of those who can afford them least. Many who use RALs are looking for a fast refund to pay for everyday living expenses-food, shelter, clothing-and the exorbitant fees only take away from their ability to pay for life's necessities." Designed to deliver tax refunds quickly via a short-term loan, which uses the refunds as collateral, RALs typically carry a fee of $100 for an average $1,549 refund. According to a recent Children's Defense Fund of Minnesota study, in total RAL fees diverted an estimated $5 million from low-income locals in 2004. In addition, partnerships with nationally chartered out-of-state banks, have allowed RAL brokers to provide such loans with an average APR of 236%. For the pilot program slated to run in two US Federal CU branches, the Express Refund offers the convenience of RALs but is interest free and has no fees associated with it. In addition, it is considered a loan of last resort and US Federal CU staffers take the time to educate participants about direct deposit of tax refunds, which can provide the much needed funds, often within four to 10 days. "That is the true secret success of this program," said Raker. "Individuals learn that they can get electronic refunds without a loan or fees. Since there is no profit in it for them, RAL brokers never mention that option so participants think an RAL is the only way they can get access to their refunds quickly." Raker adds that the program provides a true opportunity for the credit union to help participants build wealth. "There is a genuine fear in that demographic and that drives them to RALs and check cashing outlets," said Raker. "This is a terrific opportunity for our credit union to help individuals, families come into the mainstream and not be taken advantage of by fringe operators." Here is how it works. AAM clients who have had RALs in the past or who ask about RALs and/or a way to get their refunds faster are directed to one of two US Federal CU branches. Staffers there have been trained to discuss program options and educate participants on the benefits of having savings accounts. Raker says the pilot program is a three-year effort with 100 loans offered this year; 200 in 2007; and hopefully 400 in 2008. So far both organizations have been pleased with the initial results and the move has sparked free publicity not only from local news stations and newspapers but it is also gaining national interest. "For us, success would be we open 100 loans and in the process we open another 100 accounts for people who opt out of the loan and a year from now still have an ongoing relationship with the credit union through a regular savings or checking account," said Raker. "To help them reach that point – that is true success." The AAM/US Federal CU partnership is not a new one. Since 2004, the credit union has offered its branches and staff to help with Volunteer Income Tax Assistance. In fact, last year CU staffers helped over 200 filers -generating some $300,000 in refunds. Raker says the VITA success and growing negative impact of RALs preying on those in need prompted talks with AAM Executive Director Bonnie Esposito for the past two years about developing an Express Refund program. The program could finally be realized with a grant provided to AAM by the McKnight and Annie E. Casey Foundations in partnership with Northway Community Trust and Faith in the City. "US Federal Credit Union has been instrumental in getting this program off the ground," said Esposito. "There's a tremendous opportunity for other credit unions -both here in Minnesota and across the country to follow their lead." Raker agrees and says that other than coming up with a few operational procedures for employees where the pilot would be launched there weren't any other major hurdles in launching the program. Credit unions interested in creating their own RAL alternative programs but don't know how to connect with organizations like AAM can visit the National Community Tax Coalition Web site www.tax-coalition.org for links to community-based free tax preparation programs state-by-state. [email protected]