(January 17, 2006 – New York, NY)  Community Development Credit Unions (CDCUs) often do their best work off the radar, but in 2006 the spotlight fell on CDCUs acclaimed for their leadership and innovation.  From New York State to the Mississippi Delta, CDCUs working in low-income communities showed the great rewards that come from building strong relationships based on trust.

New York City CDCUs Serving People in Need

Long-time CDCU supporter, and Federation Finance Committee Member, Mary Spink, recently made the front page of the New York Times Metro section (“As Prices Rise, Housing Groups Need to Alter Tactics,” January 11, 2007).  The article praises Spink’s dedication and commitment to developing affordable low-cost housing in New York City’s Lower East Side neighborhood; historically a low-income and minority community that has lately seen housing prices soar due to gentrification.

Spink also was honored with two awards earlier this year: the Andrew Heiskell Community Renaissance Award for her work in bringing about community revitalization within the Lower East Side; and the Enterprise 2006 Innovative Venture Award, which recognized her work in advancing environmental sustainability by employing “green,” environmentally-friendly building practices in the association’s housing developments.  In addition to a crystal obelisk, each recipient of the Enterprise award receives a $50,000 cash award.  Spink used the cash award to present her hard-working staff with year-end bonuses.

Mary Spink is currently Executive Director of the Lower East Side People’s Mutual Housing Association, which has renovated dozens of rental buildings in Lower Manhattan since the 1990s.  She helped organize New York City’s largest CDCU, the $19 million Lower East Side People’s Federal Credit Union, which for years has shared its building with the Mutual Housing Association.
 
Early in 2006, another former Federation Board Member, Joy Cousminer, President and CEO of the $11-million Bethex FCU (Bronx, NY) received the credit union movement’s highest individual honor, the 2006 Herb Wegner Individual Achievement Award presented by the National Credit Union Foundation.  The award recognizes Cousminer’s tenacity and never-look-back approach to serving the low-income residents of the South Bronx, where she pioneered innovative partnerships with check cashers to expand the reach and accessibility of her credit union to its members.  Cousminer accepted the award in February at a gala ceremony in Washington, D.C. 

Cousminer was also honored this year with Bank of America’s Local Hero Award and by the Global Network for Progress’ award for Outstanding Community Service.  Bethex FCU also received an award from the Credit Union National Association (CUNA) Lending Council for its lending practices to low- and moderate-income people. 

Upstate New York and Rural Communities

While many people think of inner-city communities when they think of CDCUs, many Federation members focus on underserved and low-income rural communities.  One such CDCU is the $51-million-in-assets Alternatives FCU in Ithaca, New York, which over the years has received numerous awards for the economic development efforts in their Upstate New York community.

This past year was no exception as Alternatives FCU was honored by the Small Business Administration (SBA) with the “Top Federal Credit Union Lender in the Southern Tier for 2006” for institutions with an asset size of under $1 billion.

“Alternatives has been lending to small business since we opened our doors,” Explained Chief Operations Officer Leni Hochman.  “We specialize in supporting very small and start-up businesses.  Though small loans take as much work as large loans – if not more – and the chance of failure is high, we consider it an important part of our mission to build wealth and create economic opportunity for underserved people and communities.”

“There are also rewards,” added Hochman, “Small businesses grow bigger and often stay with Alternatives as their primary financial institution.  Small businesses are the engine of economic development, and bring dollars into our community.  It provides self-employment and creates employment.”

Their efforts have not gone unnoticed as the credit union was voted the best bank in Ithaca by the Ithaca Times.

Individual accolades were also handed down as Alternatives CEO Bill Myers was named volunteer of the year in education by the Credit Union Development Educators.

Some of their other awards in 2006 included the Dora Maxwell Award from the New York State CU League for their Livable Wage Study; and the ELLy Award from CUNA’s Center for Professional Development for their Credit Path Seminar.   The credit union also received the Golden Mirror Award from CU Executives Society, the Diamond Award from CUNA, and the Pinnacle Marketing Award from the New York State CU League.

The South and the Mississippi Delta

Another area of significant growth in CDCU service has been throughout the Federation’s southern region, where a number of member CDCUs have experienced rapid growth and substantial expansion of their activities.  Several of these credit unions received accolades in 2007 for their efforts.

Latino Community Credit Union in Durham, North Carolina has been the fastest-growing start-up credit union in the country, growing to nearly $49 million in assets and serving more than 48,000 predominantly low-income and immigrant members since it was founded in 2000. The credit union operates a fully bi-lingual staff and has been an innovator in forging partnerships to better serve their members.

As a host of the Federation’s 4th Latino Credit Union Conference in 2006, Latino Community CU organized a model partnership with Mexico’s BANSEFI financial network to facilitate the transfer of remittances from immigrants in the U.S. to relatives in Mexico.  The partnership is particularly innovative in that it brings both the sender and recipient of the remittance into the financial mainstream by opening a credit union account on both ends of the transaction.

Latino Community CU was honored with CUNA Mutual’s 2006 Excellence in Lending Award for Consumer Lending, for institutions with less than $250 million in assets.  Latino Community CU also received recognition for its Credit Builder loan program, which helps members establish a credit history through small micro loans, moving onto larger more sophisticated loan products as their credit score increases.

Hope Community CU in Jackson, MS, another high-performing CDCU, has become one of the fastest growing credit unions in the United States, more than doubling its assets to $45 million since the beginning of 2005.  Hope Community CU and its non-profit affiliate, the Enterprise Corporation of the Delta (jointly know as ECD/Hope), have provided more than 25,000 individuals with loans, credit counseling, business planning and other services.  The affiliates recently received a $500,000 award from the Annie E. Casey Foundation Families Count National Honors Program. The award honors ECD/Hope’s excellence in lending to minority and low-income people and for their efforts in helping people rebuild in the aftermath of Hurricanes Katrina and Rita.

The Federation has also committed a $100,000 challenge grant from its Community Development Relief and Rebuilding Fund to ECD/Hope.   The grant will assist the credit union in opening a new branch in Biloxi, MS to serve low-income families still struggling to rebuild their lives more than a year after the devastating hurricanes. 

The CDCU Paradox

Despite the annual litany of CDCU awards, many managers of these vital financial institutions see a growing disconnect between the historic credit union mission of “people helping people” and regulators’ focus on sustainability and return on assets (ROA). 

Some CDCU managers have expressed frustration at this. Even though their credit unions receive numerous awards for their work with the underserved; many still experience pressure from regulators who question the impact of their commitment to serving people of modest means on the credit union’s financial management.

CDCU leaders understand the need to be financially viable, but they also understand that serving low-income members simply is not as profitable as serving middle- and upper-income members.  This is why banks have fled from poor neighborhoods since the 1980s, effectively redlining those communities and making them havens for check cashers and predatory lenders.

CDCUs have responded to the rise of wealth-stripping financial predators by opening their doors in the poorest communities and offering services at affordable rates despite the higher cost of conducting business.  Many low-income members never had a formal relationship with a financial institution and need “high touch” services more than the “high tech” services that have become standard for more affluent customers.  As CDCUs develop personal relationships with their members, they are able to make lending decisions based on knowledge of the applicant’s character.  While not yet fully accepted as the norm among financial institutions, trends show that “character-based” lending has higher repayment rates and lower default levels that traditional “risk-based” lending

In 2005, the Federation worked with NCUA to develop a “white paper” to advise NCUA examiners on some of the unique issues CDCUs face.  While the paper was a major step by the regulator in addressing some of the pressures felt by CDCUs, it is unclear if examiners have actually used those guidelines when examining CDCUs.

The issue was rekindled last year with NCUA's study of credit union service to people of modest means, which was conducted in response to a request by the federal Government Accountability Office (GAO).  One direct outcome of the study has been the development of a new NCUA Outreach Task Force to look at some of the issues brought up by the study. 

“The Federation looks forward to working with the Outreach Task Force in developing new guidelines and implementing existing recommendations for serving underserved communities and people of modest means,” said Cliff Rosenthal, the Federation’s Executive Director.  “It is very important for us that NCUA address gaps between theory and practice.  As a movement that is facing constant banker attacks on our tax-exemption, the credit union industry must do more than talk-the-talk if they want to continue to walk-the-walk.”

© 2007 National Federation of Community Development Credit Unions.