This Credit Union in Disguise Is Helping Poor Latino Communities

Low-income Latinos often rely on predatory payday loans and high-priced check-cashing services. Savings accounts can change that.

Employees of Community Trust Prospera, a credit union that seeks to bring unbanked Latinos into the financial world, meet with low-income families at Sunday Friends, a San Jose community service organization.
National Journal
Alexia Fernández Campbell
See more stories about...
Alexia Fernández Campbell
June 6, 2014, 9:34 a.m.

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.”

What We're Following See More »
SANDERS UP TEN POINTS
Trump Leads Tightly Packed Group Vying for Second
13 hours ago
THE LATEST

In one of the last surveys before New Hampshirites actually vote, a Monmouth poll has Donald Trump with a big edge on the Republican field. His 30% leads a cluster of rivals in the low-to-mid teens, including John Kasich (14%), Jeb Bush and Marco Rubio (13% each) and Ted Cruz (12%). On the Democratic side, Bernie Sanders leads Hillary Clinton 52%-42%.

Source:
‘PULLING A TRUMP’
GOP Budget Chiefs Won’t Invite Administration to Testify
11 hours ago
THE DETAILS

The administration will release its 2017 budget blueprint tomorrow, but the House and Senate budget committees won’t be inviting anyone from the White House to come talk about it. “The chairmen of the House and Senate Budget committees released a joint statement saying it simply wasn’t worth their time” to hear from OMB Director Shaun Donovan. Accusing the members of pulling a “Donald Trump,” White House spokesman Josh Earnest said the move “raises some questions about how confident they are about the kinds of arguments that they could make.”

Source:
‘HERMETICALLY SEALED’
Bill Goes on the Offensive Against Bernie
11 hours ago
THE LATEST

“Bill Clinton uncorked an extended attack on … Bernie Sanders on Sunday, harshly criticizing” the senator “and his supporters for what he described as inaccurate and ‘sexist’ attacks on Hillary Clinton. ‘When you’re making a revolution you can’t be too careful with the facts,’ … Clinton said. … The former president … portrayed his wife’s opponent … as hypocritical, ‘hermetically sealed’ and dishonest.”

Source:
A DARK CLOUD OVER TRUMP?
Snowstorm Could Impact Primary Turnout
6 hours ago
THE LATEST

A snowstorm is supposed to hit New Hampshire today and “linger into Primary Tuesday.” GOP consultant Ron Kaufman said lower turnout should help candidates who have spent a lot of time in the state tending to retail politicking. Donald Trump “has acknowledged that he needs to step up his ground-game, and a heavy snowfall could depress his figures relative to more organized candidates.”

Source:
×