Nearly every city in the U.S. has an area plagued by poverty,crime, vacant store fronts and abandoned homes.

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In Tallahassee, Fla., the northwest section of the capitolcity's historic Frenchtown is impoverished, but over the lastseveral years, churches, community groups and social serviceagencies have been making slow but steady progress with a varietyof revitalization initiatives.

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Until recently, however, a key part of Frenchtown'sredevelopment had been missing. That missing part was the need fora traditional, community-based financial institution to helpresidents get out of payday loan debt traps and provide loans thatsupport Frenchtown's journey of economic recovery.

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But Frenchtown recently got more than just one financialinstitution – it got two credit unions.

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The $456 million Envision Credit Union and the $179 millionFlorida State University Credit Union, both based in Tallahassee,formed a new CUSO and partnered with a local church to open a newbranch. The branch, executives said, could develop into a nationalmodel for credit unions looking to support economic development indistressed areas across the country.

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The CUSO's origins date back to about a year ago, when ChuckAdcock, EVP for FSUCU, ran into Keith Bowers, regional director forthe Small Business Development Center at Florida A&MUniversity.

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Bowers told Adcock about the Bethel Missionary Baptist Church'sEconomic Development Ministry, which was looking to open afinancial services center. For years, the ministry was instrumentalin facilitating the construction of new homes for first-timebuyers, affordable housing for the elderly, small businesses, afamily counseling center, a community center, baseball camps andcharter schools.

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“One of the ways to address poverty is that you have to helpfolks get back on their feet educationally and economically,” theReverend Dr. R.B. Holmes Jr. said. “The faith-based community justcan't talk about it, we have to take control and act to rebuild ourcommunity. One of the missing components of that economicinfrastructure was a real vibrant financial institution in theheart of our community.”

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Because the payday lenders charge what Holmes called “ungodlyrates,” he knew the key to help people break the payday lendingdebt trap was to open a credit union, which would providetraditional financial products and services at lower rates andfees, along with financial education and resources to help membersregain their financial footing.

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In 2005, the Bethel Church developed a strategic plan to formBethel Frenchtown Community Credit Union, which several bankssupported, Holmes said. Then the financial crisis began in 2007,and plans for the credit union were put on hold for eightyears.

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Although Holmes never gave up on his credit union dream, he alsothought it might be better to talk with existing local creditunions to see if they would be willing to open a branch inFrenchtown.

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Adcock said FSUCU was interested in the idea, but determined itneeded a partner to spread the risk and costs of opening a newfull-service branch, hiring staff and providing financialeducation. FSUCU approached Envision because both credit unionsalready jointly own another indirect lending CUSO, and maintainformal and informal relationships on the business lending side.

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Both credit unions, founded by educators, have always shared thebedrock value of providing free, comprehensive financial educationresources and programs for members.

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“The more we talked it through, the more the idea made sense tous,” Adcock said. “The geography of the proposed branch wasn'tideal because we both have branches located close by. But at thesame time, we felt like if the new branch had its own brand andcreated a sense of hope and pride within that community, then wecould do something meaningful with it.”

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The area is called Frenchtown because French settlers livedthere in the early 19th century. After the Civil War, former slavesmoved to the area.

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Although the newly freed African-Americans settled in what wasconsidered low-lying, less desirable land, Frenchtown became athriving black business community starting in the early 20thcentury, Envision President/CEO Darryl G. Worrell said.

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“It's got that legacy. It's on the national historic register,so there is a lot of pride,” he said. “The city of Tallahassee hasbeen trying to rejuvenate this area, local churches have stepped upover the last 10 to 15 years, and it's kind of one of thoseconcepts that they won't let go of because of Frenchtown'shistorical perspective.”

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After months of planning and preparation, the 1,800-square-footFrenchtown Financial Opportunity Center officially opened with aribbon cutting ceremony on July 11. What's more, the branch'sopening day drew more than 60 new member accounts. New members areassigned to one of the two credit unions based on where they live,work or worship, and whether they are affiliated with Florida Statefor FSUCU or Leon County Schools for Envision.

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“What we are trying to accomplish here is to fight predatorylending, and that is a big key for us,” Worrell said.

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In addition to offering savings and checking accounts, and newand used auto loans, the new center will offer extra credit loansas payday loan alternatives and fresh start loans to help membersclimb out of payday loan debt traps.

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“We plan to look at the situation of that member or potentialmember, analyze it, look at where they are at in the payday lendingcycle, and then build a plan with them to basically get them out ofthat payday lending cycle,” Adcock said.

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The credit unions are also developing financial education-basedtraining for the 15 minority churches in Frenchtown and thesurrounding area.

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“What we are going to do is educate people about how they canfix and rebuild their credit,” Holmes said. “Now they don't have togo down the street to a payday lender that charges 300% or moreinterest on a loan. Now, you can join a credit union for $5 andthey can help you improve your credit score and rebuild yourcredit. And once you rebuild your credit, you can find a job andbecome whole again.”

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Although Florida's legislature passed a payday loan law in 2001that was promoted as a measure to prevent payday loan debt traps,it has failed to stop the wealth stripping effect of payday loanswith rates averaging 278%, according to a study released in Marchby the Center for Responsible Lending, an affiliate of the $637million Self-Help Credit Union in Durham, N.C.

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More than 83% of Florida's payday loans went to Floridians lastyear who were already stuck in seven or more payday loans.

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Additionally, with more payday loan stores than Starbucks storesin the Sunshine State, payday lenders have charged more than $2.5billion in fees from Florida residents since 2005, with more than$311 million in fees collected last year alone, according to theCRL.

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The report noted payday lenders touted Florida's payday loan lawas model legislation because it codified what lenders claimed arebest practices. But the CRL said those best practices are merelysmoke and mirrors that do nothing to prevent the loan debttrap.

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“Florida's experience with payday loans clearly demonstrates howpayday lenders rely on the cycle of debt as the core of theirbusiness model and lenders continue to drain millions in fees fromthose who can least afford it year after year,” the CRL reportstated.

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As high as the payday loan interest rates are in Florida, inmany other states the rates are even higher: Ohio is at 677%;Texas, 662%; Utah, 658%; California, 460%; Nevada, Idaho and SouthDakota, 652%; Wisconsin, 574%; Alabama, 456%; Illinois, 404%; NewMexico, 408% and Washington, 391%.

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“The Bethel Church has been very adamant that they'd like [theFrenchtown Financial Opportunity Center] to grow as a model notjust for Tallahassee, but on the national level,” Adcock said.“Because credit unions do a lot of collaborating and sharinganyway, we think other credit unions could use this model in theirown communities. It could be two credit unions or it could be 20 toform a CUSO that can serve impoverished areas and really make ameaningful impact on not just their community, but the city and thecounty they support.”

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