In the past, credit unions may have written off ITIN lending as too risky. Absent a known track record or understanding of the best ways to adapt and expand their lending services, the upsides of funding loans for ITIN holders were largely hidden.

Three Market Forces Inspiring Change

That is changing. For starters, credit union's ITIN programs are generally thriving. It's no wonder. Through its Reaching Minority Households Incubator, Filene Research Institute, along with ViClarity, Coopera and Inclusiv, took a close look at ITIN lending within the credit union industry. The groups found it to be one of the most successful programs in terms of scalability, financially viability and high desirability.

Second, the emphasis regulators are continually placing on Bank Secrecy Act (BSA) compliance is having a trickle-down impact on credit union competencies around new account opening. Put more simply, credit unions are getting better at member due diligence. This sets them up for more sophisticated account opening policies and procedures, including the integration of ITIN acceptance as part of their Customer (Member) Identification Program.

A third, long-overdue market reality is influencing the way credit unions view the ITIN marketplace. A series of social justice movements has raised our collective awareness around the failures of mainstream banking to serve marginalized groups with intention, fairness and dignity. ITIN lending is just one example of expanding products and services to make financial health and wealth creation accessible to everyone.

Four Influential Groups

For credit unions excited about giving ITIN lending a second (or maybe even a first) look, there are a few distinct groups that can be tremendously helpful to getting your program off the ground: Compliance, competitors, technology resources and ITIN holders themselves.

1. Consult with compliance: Given recent regulator focus on BSA, compliance team members can be your account-opening champions. Their higher comfort level with policies, procedures and documentation will be a gold mine in terms of developing a go-forward plan for ITIN acceptance, and eventually, ITIN lending. One creative idea we've seen to help improve community relationships and key compliance components, such as recognizing foreign identification cards, is to invite representatives of the regional Mexican Consulate to tour a credit union's operations.

2. Hack the predator playbook: Unserved consumers, such as ITIN holders, are attempting to meet their financial needs and may be falling into the wrong hands as they do so. Study the providers that are serving the most vulnerable in your area. Identify the service needs they are filling and investigate why members of the community would choose those competitors over the credit union. Ensuring products and services are appropriately tailored to the needs of the community, and that every prospective member feels welcome, are critical.

3. Get advice from techies: For many years, a physical book with identification samples was the go-to due diligence source for financial institution employees to detect a fraudulent ID. Like nearly every other aspect of financial services, opportunities to improve this process through online training, digital reference materials and digital ID screening are emerging. Have conversations with IT and/or third-party vendors to see about improvements to core systems that can make it simpler to properly enter a name or make other adjustments. Integrating new technology may also boost employee confidence in their processes, such as detecting fraud, and can make for a smoother account opening experience.

4. Talk with ITIN holders: It's crucial to understand and empathize with an ITIN holder's experience, from the decision to apply for an ITIN all the way through to choosing the right financial institution. Find a community organization to help facilitate your understanding of the needs and build trust within the community.

Harness Change for ­Life-Long Loyalty

Don't wait to reevaluate past assumptions. The safety and soundness of ITIN lending has been shown. While compliance preparation is important, ITIN lending does not require a separate lending product nor program. It can be achieved through broadening your processes and procedures to benefit every member, whether they hold a Social Security number or an ITIN.

Thriving credit union ITIN programs, stronger regulatory emphasis on BSA and an increased awareness of the need for financial inclusion are the three market forces driving meaningful change for ITIN lending.

Now is the time to harness these emerging forces to gain a foothold with a fast-growing and deserving group of individuals, each with the potential to become a life-long contributor to your cooperative.

Erin O'Hern

Erin O'Hern Vice President of Strategic Initiatives ViClarity West Des Moines, Iowa