A Credit Union Connects With Undocumented Membership

Latino Community helps young immigrants cover the cost of deferred action applications and generates loan activity in underserved markets.

 
 

Born out of a lack of safe, sustainable financial solutions for the Hispanic community in Durham, NC, Latino Community Credit Union ($117M) has spent the 12 years since its charter serving the needs of all types of membership, including recent immigrants and low-income individuals.

The credit union works hard to cultivate engaged, profitable relationships over time. And with 13.20% annualized loan growth as of 2Q 2012 and 0.89% ROA over the same period, according to Callahan & Associates’ Peer-To-Peer Software, the credit union’s presence in this community pays dividends for both parties.

When President Obama signed an executive order action this June that differed deportation and granted work permits to young immigrants who were brought to the United States before age 16, the credit union saw a prime opportunity to step up its outreach.

“We’d been tracking this deferred action option for a while because it affects a lot of individuals and families in the state,” says Erika Bell, vice president of strategy and services.  Estimates for the number of people statewide who could apply for the program is somewhere around 50,000, and more than a few of those individuals are or have the potential to become credit union members.

In response, Latino Community created a product its calls the Dreamer Loan to support, and create new financial connections with, young people taking advantage of deferred action.

The loan was rolled out in advance of August 15, the first day in which individuals could submit a deferred action application to the United States Citizenship and Immigration Service. Each Dreamer Loan covers up to $465, the exact amount USCIS charges in fees for the application process.

This is a low dollar product compared to many of the credit union’s other loans, but $465 is a significant barrier for some members, especially when there are multiple applicants in each family.

“We didn’t want members to be left out of the process because of financial reasons,” Bell says.

In the first few weeks the loan was available, the credit union received well over 130 applications and granted every one.

Members can qualify for the loan even if they lack a formal credit history, but they must have a photo ID from the United States, their home country, or their school; proof of a physical U.S address; and a valid Social Security number or Individual Tax Identification Number (ITIN).

With a six-month repayment term and an interest rate on par with its other unsecured personal loans, Latino Community structured the product to combat risk, while keeping the application process straightforward and easy to understand. According to the credit union, convenience is a primary factor in preventing undocumented members from turning to the areas many payday lenders.  

“We are not expecting a large return on this product, but we felt strongly about offering an alternative to other unscrupulous options out there,” Bell says.

There are also a number of scams that target the undocumented, offering things like guaranteed application approval for an extra fee. That’s why Latino Community complements its financial assistance with referrals to educational sessions at the Mexican Consulate in Raleigh, NC.  The North Carolina Justice Center also provides legal advice and paperwork assistance during these sessions.

Ties with these community organizations give the credit union an even bigger platform to get word of its offerings out to current and potential members.“Our strategy for marketing the Dreamer Loan was to work through word-of-mouth and our community partners as well as the media,” Bell says. “We knew people would be interested that this option was available.”

Other credit unions have expressed interest in this type of offering, but long-term connections with the Latino community require offering holistic options for people of all financial walks of life, Bell says.

“It’s not just about offering one or two specific services like wire transfers or check cashing,” Bell says. “It’s about having affordable and accessible packages of services to meet diverse needs all along the financial continuum.”

Bringing mainstream financial service and big ticket options to the entirety of its membership has been a big driver in the credit union’s recent loan portfolio success. Year-over-year as of 2Q 2012, the credit union grew first mortgages by 77.15%, roughly double the amount of peers in its asset size. The credit union also increased its new auto, used auto, and credit card activity by 1.61%, 16.94%, and 1.19% over the same period.

 

 

 

 

Sept. 17, 2012


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