Transportation provides access to professional and personal opportunities. It dictates where people can take jobs, their ability to maintain jobs, and how involved they can be in day-to-day family life. It offers freedom and choice. In areas without dependable public transit, cars are a necessity. And in these areas — as is often the case — opportunists take advantage of the people with the most need.
Sherod Halliburton, chief executive of Manatee Community Credit Union ($27.4M, Bradenton, FL), sees this firsthand. Bradenton is a community of approximately 50,000 residents, according to the U.S. Census Bureau, yet Halliburton estimates there are 15 payday lenders within three miles of his credit union’s headquarters.
Before he became CEO of Manatee in 2012, Halliburton was the executive director of a redevelopment agency. There, he helped manage a well-received affordable transportation initiative. However, the agency’s program lacked a financing component.
Under his leadership, Manatee developed its own transportation initiative, called Reliable Ride, in late 2012. Today, this program is a joint venture between the United Way of Manatee County and Enterprise Rent-A-Car.
CU QUICK FACTS
Manatee Community Credit Union
data as of 12.31.14
HQ: E. Bradenton, FL
12-MO SHARE GROWTH: 6.19%
12-MO LOAN GROWTH: 19.12%
What Is Reliable Ride?
In short, Reliable Ride provides affordable, quality transportation to low-income borrowers. But Reliable Ride is not solely a financing program; it also solves communitywide transportation and financial education challenges. Manatee has been able to help its community overcome these challenge by partnering with the right organizations and encouraging participants to meet more than baseline standards.
The United Way, which joined the venture five months ago, is the program administrator and is responsible for marketing and promotion as well as inter-agency coordination. According to Halliburton, most borrowers learn about Reliable Ride through the United Way or its affiliates. Interested parties meet with the United Way’s Reliable Ride rep, who gathers personal and financial information to determine if they meet the program’s income-based parameters.
Not surprisingly, financials do factor into the application process; however, Manatee first requires applicants to write a letter explaining how reliable transportation will improve their life. The United Way coordinates a financial education component as well, which requires applicants to watch online auto maintenance videos and pass corresponding tests. After applicants meet these two conditions, Manatee pulls a credit history, determines the loan amount — which it typically finances for four years at 14.9% APR — and sends the participant to an Enterprise car salesman who helps them find the right car.
"If we are placing a person in a car, it's important to us that they have an understanding of how to maintain that car."
“That’s based on family situation,” Halliburton says. “How many does the car need to seat? How much can they afford? What’s their lifestyle?”
Enterprise provides certified used automobiles that each come with a one-year warranty, roadside assistance, and a seven-day, 1,000-mile purchase agreement, although the United Way coordinates the auto maintenance.
“Without Enterprise, we couldn’t get away with calling it ‘Reliable Ride,’” Halliburton says.
The rent-a-car company also helps offset the program’s administration costs; however, Manatee assumes 100% of the risk of the loan.
By the end of the first quarter, the credit union expects to have served 100 members through Reliable Ride, and it aims to serve 10 members per month in the near future.
How To Find The Right Partner Organizations
Although not every credit union has a relationship with an organization as large and respected as the United Way, they can still learn from Manatee’s Reliable Ride. To start, Halliburton advises others to look for local community organizations that focus on financial stability, personal improvement, and budgeting.
“In all of our communities, there are organizations that are doing asset-building programming, financial education, and home-ownership education,” Halliburton says.
These organizations are natural partners for myriad reasons. Namely, collaborating with them allows the credit union to focus on financing while the community organization focuses on administration. Such collaborations also create a mutually beneficial relationship in that the community organization will have a financial institution to refer clients for lending opportunities and the credit union will have a larger, more diverse body of members to serve.
Plus, community organization referrals lend credibility to a credit union.
“I can say I am a socially responsible lender all day, every day,” Halliburton says. “But when the United Way or other human health and service organization says ‘this is our partner and they are going to take care of you’ people receive that message differently.”
How To Build The Right Incentives
The Reliable Ride application process includes an educational element supported by the United Way. The nonprofit’s auto videos teach viewers about basic maintenance such as how to check tire pressure, how often to change oil, and what the gauges on the dashboard mean. This helps ensure that program participants not only have a car but also the knowledge to operate it safely and properly.
“If we are placing a person in a car, it’s important to us that they have an understanding of how to maintain that car,” Halliburton says.
But the credit union also uses education as an incentive. The 14.9% rate Manatee charges is lower than Reliable Ride participants would otherwise qualify for, but it’s still high. That’s by design.
If participants can make on-time payments for 12 months and complete more extensive, in-person financial education classes, then Manatee will drop the interest rate to 9.9%.
“We want to balance economic opportunity with life lessons to prepare them for how things work in the real world,” Halliburton says. “If you make a commitment to improving your life, if you go to the class so you can understand your financial circumstance better, if you make your payments as agreed, you will be rewarded.”