Neon window signs advertise money transfers and "cambio de cheques" (check cashing). Sandwiched between a beauty salon and a convenience store, Community Trust Prospera looks like any other check-cashing shop in the largely immigrant neighborhood in East San Jose, Calif. Except it isn't.
Inside, Spanish-speaking employees urge customers to open a savings account or apply for a credit-building loan. Community Trust Prospera is actually a credit union in disguise.
The storefront on Story Road is one of six check-cashing-and-banking branches opened in San Jose and Los Angeles County in recent years. It's the Self-Help Federal Credit Union's new approach to bringing poor Latino communities into the financial mainstream. "It's a baby step," says Randy Chambers, CFO of Self-Help, a credit union that serves low-income clients and runs Prospera. "Many have never had a credit history and now they're building credit."
The goal is to reach "unbanked" Latino immigrants who are stuck in a cash-based world. A 2013 survey by the National Council of la Raza shows that two out of 10 Latinos in the United States don't use banks — a higher rate than Asians and African-Americans. They are also highly likely to rely on predatory payday loans and high-priced check-cashing services.
"Owning a bank account is not a silver bullet to financial wealth. But it is the first step," says Marisabel Torres, a wealth-building policy analyst for the council. Traditional banks have marginalized immigrant communities for many reasons, says Torres: They often come have little income, no credit history, and — in some cases — no Social Security number.
But credit unions around across the country are starting to see the Latino community as a promising market. The number of credit unions has been declining for decades. Each month about 20 of these nonprofit financial institutions close, according to data from the Credit Union National Association.
Credit-union leaders say they see the "unbanked" Latino community as crucial for their growth. And many have come up with unique ways to lure Latinos, particularly immigrants, into the financial mainstream. One credit union in North Carolina offers members a prepaid debit card that they can send to relatives abroad. A credit union in Iowa offers a special quinceañera loan for families who want to throw their 15-year-old daughters the traditional Latin American birthday bash.
Prospera's check-cashing model hasn't yet caught on, but it seems to be working. The first branch opened in 2010 and now all six count a total 11,000 members and $1.3 million in savings, according to Chambers.
Darwin Morán, 36, first starting going to Prospera in East San Jose to cash paychecks from his landscaping job and to wire money to his mother in El Salvador. At first, he didn't realize it was a credit union. Morán once had a Wells Fargo savings account, he said, but never used it because he lived paycheck-to-paycheck. He didn't want another one, but Prospera's staff kept bugging him about saving his money.
"I started to become friends with them and slowly I started to change my mind," says Morán, who opened a savings and checking account three years ago. Morán applied last year for a "Fresh Start" loan, which puts $1,000 into an account that customers can't touch until it's paid off. He wanted to raise his credit score after credit-card debt had tanked it, he says. Last month, Morán made his final $100 payment and saw his score jump 3 points.
"Fixing my credit and paying my debts was so important to me," says Morán, who supports his wife and 11-year-old daughter on about $2,500 a month. "Maybe I will buy a home one day, but that seems out of reach right now."
Morán represents the largely untapped market that credit unions are eager to attract. In 2009, the Credit Union National Association partnered with Coopera, a Hispanic consulting firm that shows credit unions how to reach the local Hispanic market. Coopera has since helped more than 200 credit unions change the way they do business, whether it means hiring bilingual staff or offering ways for customers to send money abroad.
Miriam de Dios, CEO of Coopera, says many Latino immigrants avoid banks because they usually require a driver's license to open an account. But it's perfectly legal to accept a foreign government-issued ID, De Dios says. She often trains credit-union employees about the different forms of international identification they can accept. That is one huge step to opening up banking to the cash-only community, De Dios says. "They have been missing out. By dealing in cash, you can't build credit. It affects what you pay in rent and your insurance," she says.
De Dios even worked with one credit union in Travis County, California, to develop a modern version of a Mexican lending circle known as a tanda. Instead of making monthly cash payments to a group leader who safeguards the money pot, participants pay off a group loan that they can only access after the last payment is made. De Dios describes it as a savings account that also builds credit.
Only 2 percent of all federally-insured credit unions primarily serve Hispanic communities, according to the National Credit Union Administration. Following the financial crisis, Congress recognized a need to preserve community credit unions that primarily serve ethnic minorities. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required credit union administrations to create a program that provides these institutions with training, mentorship, and technical assistance.
Nueva Esperanza in Toledo, Ohio, was among the first to receive a grant under the program. The fledgling credit union is the first charted by the state of Ohio to serve Latinos. The old brick storefront in south Toledo offers savings accounts and small loans to people from Bolivia, Ecuador, Peru, and Mexico, says CEO and President Sue Cuevas. Gaining the trust of a community used to living in the shadows is hard, says Cuevas, who started the credit union with seven members in 2011. But it's worth the effort to see someone buy enough equipment to start a landscaping business or replace a broken furnace in their homes.
"I always remember how I felt the first time someone signed a check and gave me the loan," says Cuevas, who has enrolled about 500 members in Nueva Esperanza. "Someone believed in me."