Seven years ago in Wilmington, DE, a community credit union was absorbed by another credit union. That institution eventually left the east side of the city – a rough neighborhood with dilapidated, boarded-up storefronts and row houses. There were few alternatives for the community.
With the demise of the community credit union, came a push from the Delaware Community Reinvestment Action Council (DCRAC) to form another cooperative financial institution to protect the needs of the community.
“Many of the residents here have modest incomes,” says Rashmi Rangan, executive director of the Delaware Community Reinvestment Action Council. “They would face an emergency often times around the holidays, and then they would go to a payday lender or a title lender out of which it would be difficult for them to emerge. This was a cycle that was keeping them from emerging and building their own wealth.”
In October, with the help of other financial institutions and community members, Stepping Stones Community Federal Credit Union’s ($347.6K, Wilmington, DE) received approval for its charter, making it the first credit union chartered in Delaware in 30 years and the only credit union charted by the NCUA in 2011. Three months later, a credit union was resurrected on the east side of Wilmington, and in March, a grand opening drew community members, leaders and supporting politicians.
“Stepping Stones is a jewel in Delaware’s crown,” says Rangan. [Wilmington has] "a lot of history. We have a lot of culture. We have a lot of problems. We can together show that we can do so much.”
But the credit union didn’t get started without a lot of hard work and, most importantly, cooperation.
In 2005, DCRAC surveyed the neighborhood to analyze whether there was community support for a financial institution in the area. The feedback from 250 surveys was an overwhelming “yes,” says Theresa Hasson, chair of the board of Stepping Stones.
With the help of Delaware State Police Federal Credit Union ($118.9M, Georgetown, DE) Stepping Stones reviewed and edited its business plan, which must extend five to seven years. DSPFCU executive vice president sits on Stepping Stones compliance committee and was ble to help the new credit union with regulatory issues, before sending the application to NCUA. DSPFCU donated a teller station, a vault, and teller drawers, and area banks helped with capital and equipment.
Stepping Stones Community FCU recieved a significant boost from CU*Answers, a CUSO owned by more than 100 credit unions nationwide. The CUSO converted Stepping Stones to its CU*BASE processing system in January through its Start a Credit Union program. Stepping Stones will receive two years of data processing services for free.
“Here was this brilliant opportunity for us to partner, bridge the gap between the financial institutions, or banks and credit unions,” says Rangan.
Interested in putting non-member deposits into a low-income credit union, about seven financial institutions in the area deposited money within the first six to eight months, says Hasson. Discover Bank gave Stepping Stones fireproof file cabinets. Its maintenance team designed the exterior of the credit union’s teller desk and built its service reception area. Artisan’s Bank donated all the cameras for security. And Citibank worked with the credit union to create marketing materials, such as brochures and signs.
“It’s really a collaboration of everyone coming in and doing more than their fair share to make sure [the credit union] is a great success,” says Rangan. “We really should be very proud that in times of need, we come together.”
While the credit union does traditional marketing, the majority of the hype comes from the executives attending community events, because it’s ultimately about word-of-mouth for new institutions.
Stepping Stones now has 115 members using the credit union for share accounts. A $5 deposit is all it takes to become a member. The institution pledged to get 340 members by the end of the year, and it wants to start offering loans next month. It is aiming to be an alternative to payday lenders and title loans in the area.
“The challenge with this whole credit union is how do you do that in a profitable manner, in a very transparent, consumer-friendly way,” says Matt Parks, treasurer at Stepping Stones.
Parks is looking forward to watching the performance of the credit union's first loan. One of the biggest questions he has is, “How do you get lenders to pay you back and get them to respect it and honor it and utilize the credit union for what it was built for?”
The credit union is taking steps to be profitable by using volunteers from DCRAC to restore the building and work the teller line. The volunteers are also part of Stepping Stones designation as a community development credit union. Access to additional capital is advantageous for the cooperative and part of the CDCU framework.
Rangan says she knows more challenges await the young credit union, but with its CDCU charter and its FI partners, the credit union has access to many tools and talent that provide a safety net to dismiss failure.
“Some people come in because they are moved by an opportunity to serve this community in their own way,” says Rangan. “So we have members that come in every week and put some money in an account. They don’t need the credit union. The credit union needs them.”
The second group is individuals that need the credit union, who will eventually come in every other week for a loan. And the part-owner pitch has been successful in building hype about the cooperative and creating a dedication to repayment.
“It’s that ownership piece and the second chance. The opportunities that this credit union -- that we all own -- provides our borrower base, is what’s going to make this a success,” says Rangan.
Author Bailey Reutzel and multimedia producer Melissa Forsyth hit the road in August for a weeklong Cooperative Trek. They traveled from Washington, DC, to Portland, ME, stopping along the way at 11 credit unions and learning first-hand about successful strategies to share with our readers. Follow the 2012 Cooperative Trek on CreditUnions.com as we release stories from the road throughout the fall of 2012.