Calls for $100-Million Appropriation for CDFI Fund

CRA “not needed” for Credit Unions

(March 1, 2007 - Washington, DC)  Joy Cousminer, President/CEO of the Bethex Federal Credit Union headquartered in New York City’s South Bronx neighborhood, was the only non-governmental witness to testify at the March 1 hearing of the Subcommittee on Financial Services of the House Appropriations Committee.  The subcommittee is a new legislative configuration, with jurisdiction over the Community Development Financial Institutions (CDFI) Fund, as well as NCUA’s Community Development Revolving Loan Fund (CDRLF) and the Central Liquidity Facility.  It is chaired by Representative José Serrano, whose South Bronx congressional district – described by him as the poorest in the nation – includes Bethex.

Joy Cousminer, CEO of Bethex FCU (Bronx, NY) testifies before the Subcommittee on Financial Services of the House Appropriations Committee

Bridging the Gap to the Financial Mainstream

The focus of the hearing was information-gathering about the availability and cost of financial services in low-income communities, an area that Ms. Cousminer, founder and leader of the 37-year-old CDCU was uniquely qualified to address.  Established by and for women on welfare in 1970 to combat pawn brokers and other high-cost providers, Bethex today has $11 million in assets and serves 10,000 members.  “Its mission,” testified Ms. Cousminer, “remains the same: bridging the gap to the financial mainstream.”  Among its members, “irregular employment, no prior relationship with a formal financial institution, little or no savings or assets, and a lack of understanding about the American credit scoring system” are common.  Immigrant groups from the Caribbean and, more recently, West Africa, are prominent among its membership – a population segment of particular interest to Chairman Serrano, who stressed the need to protect these individuals once they are in the U.S. regardless of the circumstances of their arrival.

Bethex a Recognized Innovator

Ms. Cousminer is nationally recognized as a pioneer and innovator in the credit union movement, having won the 2006 Herb Wegner Award of the National Credit Union Foundation and numerous New York City awards and commendations.  Under her leadership, Bethex was the first credit union in New York City to become an SBA-approved lender; a leader in providing Volunteer Income Tax Assistance (VITA); and the developer of a unique partnership with check-cashing establishments that enables the members of the small, two-office credit union to access their accounts at over 130 locations – some of which operate 24 hours, 7 days a week – across New York City.

As an example of Bethex’s work, Ms. Cousminer told the committee of a recent business loan to a legally-blind auto body shop owner.  The credit union made its loan in conjunction with one from the New York State Commission for the Blind and Visually Handicapped.  He used the proceeds to upgrade equipment and hire additional employees in an area desperate for job creation.

Impact of Federal Dollars

“While the credit union existed for many years without grant support,” Ms. Cousminer testified, “It would be nowhere near the institution it is today without public funding.”  Bethex has received grants totaling over $800,000 from the CDFI Fund, enabling it to build net worth and greatly add to its deposit base. It has also received repeated, smaller grants from the technical assistance grant pool operated by NCUA through the CDRLF.

Left to right: Federation Executive Director Cliff Rosenthal; Bethex FCU CEO Joy Cousminer; and Subcommittee on Financial Services Chairman, Rep. José Serrano.

Ms. Cousminer encouraged the committee “to include at least $100 million for the CDFI Fund so that this important agency can continue to assist institutions like mine … to help break the cycle of poverty.”

The Bush Administration has requested approximately $29 million for the CDFI Fund, far less than its historic level, which at one time reached $118 million and more recently, had been reduced to the $55 - $80 million range.  Newly appointed CDFI Fund Director Kimberly A. Reed pointed out that the President’s request was four times than the previous year’s.  Nonetheless, several committee members, including Representative Kilpatrick, expressed surprise and dismay that the Fund had been so drastically cut back.  Pressed on the appropriations figure, Ms. Reed promised to “work with” the committee. 

CDFI advocates were encouraged by the strong endorsement delivered by Mr. Serrano.  He stated, “I have grappled with the lack of banking services in my Congressional District for years, and so have a firsthand knowledge of what these credit unions and the CDFIs are capable of in an underprivileged area. Ms. Cousminer’s testimony about her experiences in my Congressional District are proof positive that there is a solution to the unbanked, and it runs in part through credit unions and the support of the CDFI Fund. Congress has an obligation to support the efforts of these entities as much as possible.”

Refund Anticipation Loans, CRA Draw Attention

In the question-and-answer period that followed her formal testimony, Ms. Cousminer fielded questions on a variety of concerns of Chairman Serrano and Ranking Member Regula.  Mr. Serrano inquired about the range of loan products offered by Bethex, and the loss rate incurred in serving the low-income population.  He appeared pleasantly surprised at the relatively low figure, and inferred accurately that Bethex “guided” or educated its borrowers.  Mr. Serrano expressed concern about the high cost of Refund Anticipation Loans (RALs), and the ways in which customers were misled about products like these.  In contrast, Ms. Cousminer noted that Bethex charged its members a flat fee of $10, regardless of the size of the refund (which may be substantial) and how long it actually took members to receive their refunds. Education and outreach are crucial, she noted:  “We do constant outreach.  We give presentations to churches, to clubs, to transitional housing.” 

Asked by Mr. Serrano what the committee should look at with respect to the CDFI Fund and the NCUA CDRLF, Ms. Cousminer responded, “all the good we are doing is just a little bit of what needs to be done.  A lack of funding is what keeps us from doing more.”

CRA for Credit Unions?

Mr. Serrano asked for Ms. Cousminer’s views on the extent to which credit unions should be covered by the Community Reinvestment Act (CRA).  She responded that “a large number of credit unions are very concerned about low-income people.  They don’t need formal CRA.  They are doing it, and they are going to do it.”

Mr. Serrano concluded the hearing with high praise for Ms.Cousminer and Bethex.  “I want to publicly, as a member of Congress, thank you for all you’ve done all these many years,” Mr. Serrano concluded, “for proving that [it is possible to]  run good, solid institutions.  I know people trust you, and trust your institution.” 

A strikingly large number of committee members attended the hearing, despite many other simultaneous hearings.  In addition to Chairman Serrano and Ranking Member Regula, seven members of the Appropriations Subcommittee attended all or part of the hearing.  The hearing room was packed with representatives of credit union and other trade organizations and press, the CDFI Coalition, and local CDFIs.

NCUA, CDFI Fund Testimony

Ms. Cousminer’s testimony was preceded by that of CDFI Fund Director Kimberly A. Reed and NCUA Chairman JoAnn M. Johnson.  Ms. Reed’s written testimony highlighted the work of CDFI Fund awardees Bethex FCU, North Side Community FCU, Alternatives FCU, and ASI FCU. Committee members expressed concern not only about the meager appropriations request, but the lack of Administration requests for Bank Enterprise Awards (BEA) and for a Native American set-aside. 

Ms. Johnson’s testimony acknowledged that credit unions could do more to serve the underserved, and urged that Congress restore the ability of credit unions of all types to add expansions aimed at reaching this population. Financial education was a prominent part of her exchange with the committee.  She called attention to credit union responses to predatory lenders, including the very successful low-cost offering of North Carolina’s State Employees’ CU, which incorporates a savings feature in its product. 

Representative Kilpatrick noted the substantial amount of anti-credit union mail that her office has been receiving; while praising NCUA and credit unions – “You’re singing to the choir,” she noted -- she remarked that credit union victories had come because the movement mobilized members to express their support.

© 2007 National Federation of Community Development Credit Unions.