Products and Services for Underserved Members


Kathryn Baxter: Good afternoon, everyone. Welcome to our
webinar, the first webinar that we have for 2014 from the Office of Small Credit Union Initiatives. This afternoon weíre going to be talking about products and services for underserved members. My name
is Kathryn Baxter. Iím going to be your host for this afternoon along with Vanessa Lowe, but before we begin our webinar Iíd like to go over a few administrative items. At any point in time you may feel free to submit a question using the Ask a Question box thatís on
your console. Itís on your left-hand side. In order for you to be able to download the presentation, you can use the green Resource widget thatís at the bottom of your screen and that way you can have access to the PowerPoint presentations or print
them out. After our webinar weíre going to send you a survey, so stay on the line because weíd like to get your comments. Always, we closed caption our webinars within three weeks of the presentation. Todayís webinar is going to be very interesting and to get
us started Iím going to introduce our first speaker, who is Vanessa Lowe. Vanessa is an Economic Development Specialist with the Office of Small Credit Union Initiatives and Vanessa knows quite a bit about this particular topic so Iím going to turn the console over to Vanessa right now. Vanessa, weíre waiting to
listen. Vanessa Lowe: Thank you so much, Kathryn, and welcome everyone. This is a very exciting webinar. We have been talking about the low income designation for about a year and a half now and weíve had about – I think this will be our third webinar thatís speaking to those credit unions that serve a
large portion of low income members. I want to say, though, that weíre welcoming everyone on this call because in todayís environment all credit unions should really be very much aware of serving the underserved and so on this call what weíll be covering today are several things. First,
I want you to get familiar with the main speakers whoíll be on the call so weíll do some guest speaker introductions and youíll see their faces in a moment. Then Iíll give an overview of the 2014 Community Development Revolving Loan Fund Grants Program. Itís been announced and one of the initiatives that
weíre promoting is for CDFI certification, so itís related to what youíll hear from some of our speakers today, so weíll talk more about that when I get into the Grants Program. And then the main portion of the call will actually be three different case studies. We have presenters on the
line today from three very different credit unions. One is Elliott Federal Credit Union in Jeannette, Pennsylvania. The next speaker will be from MariSol Federal Credit Union in Phoenix, Arizona. And the last is St. Louis Community Credit Union in St. Louis, Missouri. Now weíve selected these speakers because
theyíre at various stages of developing products and service for their members. So when we start with Elliott youíll hear about sort of a starting relationship and a partnership that that credit union is developing and how that manager is working with his Board. And then MariSol is a little further along in the process and youíll hear about an interesting
product they have. And then the final speaker, I would say, of the speakers is the most advanced and so heíll be talking a lot about his partnerships and other ways that this credit union has grown almost astronomically as a result of really reaching out to the underserved. So we will be talking for about an hour and then the last
half hour of the webinar is dedicated to questions and answers so I want to encourage you to start asking questions whenever you need to. Youíll notice that there is a QA button. Itís in the bottom middle of your screen. Itís red and it has QA on it and when you click that
it toggles open the Ask a Question box. And so you type that right in and weíll start collecting the questions and we have Kathryn and Diane Rector whoíll be moderating the questions and then feeding them to the speakers when we get to that last half hour. The other thing I would ask you to do to is to clarify who
youíre asking the question to. You can ask everybody but during each speaker you might say oh, I really want to hear from Robin about that, okay, so just make that clear when you ask your question. Okay, so letís move on and letís get some faces on the screen. Excuse me. Okay, so the voices on the webinar. Iím going to start. My
name is Vanessa Lowe and, as Kathryn said, Iím an Economic Development Specialist with the Office of Small Credit Union Initiatives. Iíve been with NCUA for about six years now and before that I was with the U.S. Treasury Community Development Financial Institutions Fund for about seven years. Iíll leave it there and now Iíll turn it
over to James Benson. James Benson: Good afternoon, everybody. My name is James Benson. Iím the CEO of the Elliott Federal Credit Union. Iíve been with the credit union for 14 years and Iíve been involved in credit unions for about 22 years. Thank you. Robin Romano: Buenos dias from lovely, sunny Phoenix,
Arizona. I am Robin Romano. Iím the CEO of MariSol Federal Credit Union. Iíve been here 15 years. Prior to that I worked for NCUA. Paul Woodruff: Good afternoon from the moderately cold St. Louis. My name is Paul Woodruff. Iím with St. Louis Community Credit Union. Iíve been in the credit
union industry for about six or seven years now and with St. Louis Community Credit Union in particular for the last four and a half. Glad to be here today. Vanessa Lowe: Wonderful. Thank you, speakers. So the next slide – we want to start getting to know whoís on the
webinar so this is a question I think that we ask on all of the webinars. We want to get a sense of the diversity of the asset size of the credit unions who are participating today. Youíll notice thereís a series of options; this is a choose one option survey here. So is your
credit union in terms of total assets less than $1 million, greater than or equal to $1 million but less than $10 million, greater than or equal to $10 million but less than $50 million, etcetera. So click the button that corresponds to your asset size. Weíre going to give that some
time for you all to respond to that. Iím going to keep pressing the Refresh button here and weíre getting some responses. Okay. The predominance so far is greater than or equal to $10 million but less than $50 million at 32%.
It dropped down a little bit. Okay, Iím going to push these results. Thank you for your responses. We have two more surveys so prepare to interact with us. All right, so it looks like a small number of the less than $1 million credit unions. The predominance is the greater than $10 million
but less than $50 million at 31% and then we have some that are greater than $50 million and less than $100 million and weíre happy to know that there are also some greater than $100 millions on the line, so thank you for that, at 15%. Okay, so weíve done the survey. Now let me get into the 2014 grants
round. Every year the office of Small Credit Union Initiatives manages the Community Revolving Loan Fund Grants Program. This program allows low income designated credit unions to apply for funds that will help support them in providing more
or better services to their membership, predominantly to underserved members. The guidelines have already been posted; they went out on December 6, 2013, so if you have not found them or gotten that email or looked at them yet, I encourage you to do that. Go
to the NCUA website and under the OSCUl link, O S C U I forgetting how we spell our name, Office of Small Credit Union Initiatives we have a page on the site and there youíll see a Grants button and youíll get the details there. The application round, youíll have a very
short period. The interface, itís an online application, opens on February 3rd and it closes on February 14th so please make sure that you review the guidance, decide what you want to apply for and be ready to apply within that very small period, okay? Right now for
this round there will be a maximum amount that any credit union can apply for that is $16,500 and you can apply in three different categories. All right, letís talk about the three different categories of assistance that you can apply for in the current grant round. The
first is new products and weíve changed this around a little bit. In the past you would apply for a new product, youíd do some research, youíd then ask us for an amount of money and youíd have to provide a lot of backup documentation. Weíve actually tried to simplify the process and
identified what we think are some of the most important products here to provide to your members and weíve done the research on what the average cost is and so, if you apply for this, youíll notice that we have identified the amount that you would get for it, okay? And so itís things like the first ATM, online
banking. We really want to encourage the small credit unions and the low income designated credit unions to be ready to respond to those members that really want to use more technology and so basically things like an ATM, we encourage you to make sure that you have that and we want to support you in getting
that. Youíll also notice that weíre promoting electronic or digital signatures, remote deposit capture, electronic bill pay, prepaid and debit cards, and your first website if you havenít done that. So thatís the first category, new products. The second category of assistance is student internships.
We know that itís a great time to really encourage young people to get into the credit union movement and we want you to do that. Thereís a $4,000 maximum, $4,000 maximum for this particular category. Now this time it has to be a high school or college student. In the past weíve said an underemployed person or an
unemployed person; weíve moved away from that, so it has to be a student. And the window is you need to hire by July 15th and end the engagement by August 31st. Now hereís the thing if you received funds for this category in 2013, we wonít be funding you for that again this year so just beware of that and donít
waste that category in your application, okay? We really want to get some new applicants here. Now the third category is what most relates to the speakers who will be talking today. Of the three speakers, two of them are CDFI certified. CDFI stands for Community Development Financial Institutions Fund. I
mentioned that briefly because I worked there in my last employment and this institution – itís a division within the U.S. Treasury supports supports financial institutions that have demonstrated a commitment to serving underserved populations, low income communities, etcetera. The
predominance of the institutions that are certified by this agency are called non regulated loan funds, but the second-largest category is credit unions and we at OSCUl really want to support more credit unions to pursue CDFI certification. So the third component of
our grant round is a challenge to try to get 40 more credit unions certified. We will be offering $2,500 maximum for a credit union to find a consultant or get some support to submit that application. The word on the street is it does involve a little bit of work, often some technology
and some analysis, and so itís not unusual to need an outside consultant to help with that application. So weíve got $100,000 and again hope to provide 40 grants to support more credit unions being CDFI certified. Now one component is youíre going to need to pass a capacity index and one of the things we want to do is
just make sure youíre not sort of wasting your time by getting those funds so at the base level credit unions are expected to have a demonstrated commitment to serving the underserved and so weíll ask some questions around that and also some basic financial capacity questions. All right? So again, thatís a challenge
and we encourage you to consider applying for that, CDFI certification assistance funds. Okay, letís move now into the next question, the next survey. What we want to understand is of the groups that are on the webinar, how many of you have experience with the CDFI Fund? This survey you can press
as many buttons as you need to. So the questions are have you heard of the U.S. Treasury CDFI Fund before this webinar? Click that if so. Have you applied for CDFI certification at any time in the past, whether you were approved for it or not? Have you achieved CDFI certification? Have you applied for CDFI program funding?
Thatís the thing that two of our credit unions on the line have received funding, so youíll hear more about that when they speak. Have you received a CDFI program award of any kind? The CDFI program is a specific program but they also have different programs like new market tax credit and BEA, so
think of that as the larger; have you ever gotten anything from the CDFI Fund? And the last question is have you partnered with a bank enterprise awardee? One of the programs of the CDFI Fund provides incentives to FDIC-insured banks to make investments in community development
financial institutions and other community economic development programs, and one of the main ways that they do that is they might invest money in a credit union, say a CD or something like that. So very often there are credit unions who have received essentially partnership funds from bank enterprise awardees. So I hope
youíre pressing the buttons. Let me go to the poll results and see how weíre looking here. All right, weíve got a couple of folks. It looks like 8% of the participants have achieved CDFI certification. Okay. All right, Iím going to push the results
out as soon as I – there we go, push these results, okay. So this is good. I like that most of the credit unions on the line or the participants on the line have heard of the CDFI Fund, so thatís great, 84.5%. 2.5% have
applied for certification, 9% have achieved certification, 1.9% have applied for any kind of CDFI Program funding, 1.9% have received a CDFI program award, and zero percent have partnered with a bank enterprise awardee, so that might be a topic that weíll cover in a more detail
in a future webinar. Okay, right now Iím going to turn it over to James Benson. James, go ahead. James Benson: Okay. Thank you very much, Vanessa. Good afternoon, everybody. My name is James Benson. Iím the CEO of the Elliott Federal Credit Union. We were chartered in 1935 for
the Elliott Company employees as a single common bond at that time. Weíre located in Jeannette, PA – Pennsylvania and at one time we had the Glass City title because at one time we were the largest producer of glass in America, so thatís why we got the title. We are a multiple
common bond field of membership now; it changed in 1984. When I came onboard at the Elliott Credit Union we had about $12 million in assets and about 13 SEG groups and as of the end of 2013 we had over $30 million in assets and about 150 SEG groups. As you know
whatís going on in America, plants are shutting down, and so thatís the problem thatís happened in Jeannette; itís fallen on hard times. The next slide is how to build a partnership and weíre new at this; a lot of this is new for me. But we formed a partnership
with a local organization called Jeannette Circles and, if I can just stop, I want to explain two things. Jeannette Circles was founded in 2008 by the Westmoreland Community Action. The Westmoreland Community Action is a private nonprofit human services organization. It helps low income
struggling families to improve their standard of living. A good partnership, I felt, and they asked me to get involved and provide this financial literacy course and so I agreed. In fact, tonight will be the first course. I thought that was pretty good. If we can go on to the next
slide? And what you have here is the actual meeting between Westmoreland Community Action and the Jeanette Circles. It was well attended and I think what that does is gets the community involved and thatís actually how I got involved. It was actually by chance for the Jeannette Business Association.
I think anybody can do that. Any other credit union can do that. It really wasnít that hard; you just have to know where to go. And now that I know this I look at that and say well, you know what? Thereís always the Salvation Army. Thereís a church. We need to reach out to these places and help the underserved, the people
that are paying too much, and thatís kind of where weíre coming from. Iíve got the Board of Directors onboard. Iíve got all the employees. And so weíre just moving forward with this and I think itís a very good partnership with the Jeannette Circles initiative and the Westmoreland Community Action.
Go on to the next slide. And part of it is this is just the beginning, so this will probably change. What weíve come up with was a second chance checking. Weíll open the account; maybe weíll give them the checks but theyíll go through their share draft account. We do want them to
attend a two hour financial education class. We try to get them to get direct deposit because they have to have an income source to have a checking account. Weíll give them free checks down the right or right then. Depending on what happens we may give them a Visa debit card and weíll waive certain fees. With the second
chance loan, itís pretty much the same thing. We want them to go through this financial education class, which is what Iím putting on tonight. Try to get some direct deposits. Weíll assist them with the loan application. Start them out with a small loan to help them rebuild up their credit and
everything. Weíll also offer our Visa at 9.9%, you know, after about six months of the direct deposit. Really what we want to do is try to pull them away from the payday lenders. As you know and everybody knows, wait, Iím hearing it all the time, these people will never get out of that vicious cycle and weíre
trying to pull them out of that. And so this whole program that we have, as youíll see and with the other two speakers, is just the beginning, but I think that this is where we all need to be. Weíre onboard and I think with more help I think we can help more people. I think thatís it. Thank you. Vanessa Lowe: Okay. James Benson:
Thank you. Vanessa Lowe: Thank you, Jim. Thatís helpful. I just wanted to ask one question. Can you just give us a few words on the structure of the financial education partnership? How many classes, how does it fit in with what theyíre already doing? James Benson: Yes, yes. The classes are basically three
classes and itís broken down into anything from the scams and frauds that are out there, how to budget, how to work your checking, the difference between banks, credit unions, what we can do. Now also through these meetings that we have weíll try to get the word out there about the credit union. A lot of people
donít know and this is a way to say look, I mean, we have a member that works for a store down the road and maybe we can say to them weíll go talk to your boss and weíll talk to them about maybe bringing in that business. So in essence itís really helping them out but also maybe possibly bringing in a business here, a
business there, and I think thatís how it goes. Vanessa Lowe: Thank you. Thank you. All right, letís move on now. So that was our first speaker; now weíll go on to Robin Romano. All yours, Robin. Robin Romano: Thank you. Greetings, everybody. I hope everyoneís having a wonderful day. MariSol Federal Credit
Union was founded as Maricopa County Employees Federal Credit Union, so we were a county employeesí credit union. In 2011 when NCUA pushed and allowed people to go out and serve unbanked and underserved areas we took advantage of that because we realized that we had already been serving these areas.
Our credit union is kind of in the middle of an underserved, under banked area. And probably for those of you out there who serve county employees, you know that theyíre probably not at the top of the pay field so we already had quite a bit of experience in that,
so we started to expand into several areas and added about 20 zip codes in 2011. In 2009 we merged with another credit union called Chicanos Por La Causa and that helped kind of tip us over the scales of serving greater than 60%
of our field of membership to underserved areas. At that time we discovered the Federation of Community Development Credit Unions and we decided that it would probably be a good time to become CDFI certified. I know that Paul is going to talk a little bit more about the
Federation but all I can say is that itís a wonderful organization and I could not have gotten my CDFI certification without them. And I say that and I should note that I am a Board Member of the Federation of Community Development Credit Unions. So in 2010 we became CDFI certified
and the following year we applied for a grant from the CDFI Fund to better serve our markets. That was a $750,000 grant, a capital grant which came at a really wonderful time for this credit union, and weíve used that to expand. Over the last several years
weíve grown about $4.5 million and a lot of that has been due to having that capital grant. So weíve been involved in serving the underserved for a while and these are some of the products that we offer. Some of these products may help you in serving out.
We do allow accounts to be opened with only an ITIN. An ITIN is a number that Social Security assigns to someone who may not be, well, is not able to get a Social Security number. Itís a legitimate number. Itís a number that they use in order to pay
taxes and itís also a number that they can give to an employer. We do offer accounts that you can open with ITIN as well as alternative IDs such as a MatrÌcula, which is a special ID that is offered in Mexico, as well as international driverís licenses. We also
and probably many of you out there have accounts that are only offered – a savings account at a $25 minimum balance, but we also include an ATM. We stuck that in there for an ATM card because so often the access is needed in order to get to their money and having an ATM
card is especially important. Itís not a debit card; itís a true ATM card. And I realize industry is trying to get rid of ATM cards but in surveying underserved areas, this may be a very important tool for you as well as having CDs starting as low as $500. This has been an extremely useful tool
for us as well and itís easy for somebody to accumulate the $500 and be able to put into an account that earns a higher rate of interest. We also offer IRA accounts for starting at $5. Yes, I said that – for five measly dollars, a cup of coffee over at Starbucks, you can open an IRA account
at MariSol Federal Credit Union. It helps people who may not be thinking about their future or donít think they have enough money to think about retirement. You can open an account for $5 to give yourself an edge. In addition we also have a checking account
program called Start Again Checking. This is for people who may have had a few dings on ChexSystems. We do offer that at a fee a month and it is a great way to be able to get people into a checking account product. We do offer that if you have had no
NSFs over the last 12 months that we will automatically upgrade you into a free checking account. And those are some of the savings products. We have found when dealing with serving underserved, unbanked or just into CDFI areas that you want to make sure you have both savings
products as well as lending products. A couple of lending products that we have found that have worked extremely well for us are shared secured loans. Shared secured loans is a concept thatís not commonly understood by these markets and once they do, itís a great way to introduce
them into the lending community in a safe way. We probably book about 75 shared secured, savings secured Mastercards a month and normally for a $500 limit, although you can always do more, and itís been a very successful product and most of the people that get these products
graduate to unsecured lending over time. But one of our most successful products has been a payday alternative loan. Weíve been doing them since 2007. Itís $500, so small balance loan, four-month repayment, 18% rate. We do charge an application fee that has to be
applied to everyone – no exceptions – of $50. We report these to the Credit Bureau. Itís a wonderful way for people to either establish but a lot of times reestablish credit and Iím sure everybody has fields of membership that need
to reestablish credit. Weíve done over $6,800 in loans. In the month of December we did 110 of them. We also have a forced savings component on that. The member must save as a part of their payment $20 a month so at the end of the four months they will
have $80 in savings. Yes, some of them do use the money to get another quick loan but we have quite a few of them that use this as a component to start saving. Since 2007- and this really is a true figure – we have charged off less than $26,000 in these accounts. Theyíve been a very successful
product. They do require a lot of monitoring and they do require a lot of work; I wonít lie to you. But it is a very good product to offer. We also offer a citizenship loan. We do have a large component of our field of membership that is of the Latino community. This citizenship loan
can be used for Dreamers as well for deferred status. We offer a maximum of $1,000. Itís a 12-month payback. And we offer 6% no matter what the credit score. We do do risk-based pricing but on this particular product we offer the same rate because we view this as a product to help
the community. We do make checks payable to Homeland Security and itís been successful. I have not yet had one of these loans go bad over time. I will say that in developing this product or this other product that Self-Help has is that you do need to develop community partners. Our
first speaker, James, talked about community partners. Itís very important when dealing in these areas that you have someone who will go out and say I can point you in a right direction; I can put you together with a financial institution that can help meet your needs. Self-Help also does a Dreamer
loan. Their amount is lower; thatís the actual dollar amount thatís needed to send to Homeland Security to get deferred status. Deferred status is the legal status given to those young adults – forgive me, but I donít remember what the age range is so that they
can eventually get to citizenship. The last product Iíd like to talk about that we do is again working with a partner, a fellow CDFI in the Phoenix area, Neighborhood Housing Services. They had not gotten money for funding to do real estate loans so we partnered
together and we came up with a product that met kind of the needs of our community. The Phoenix area got hit hard during the Great Recession. We had real estate prices that dived up to 60% in some areas and that was bad for a lot of people but it was good for people of modest
means. It meant that they could afford a home more easily. Unfortunately, financing also dried up at the same time and in our market the ability to get private mortgage insurance became more difficult and even FHA financing became more difficult, so we created a product where, instead
of having PMI, the borrower is self-funding with a monthly premium that they pay into a savings account. Our premium on that on a $100,000 loan would be 75 basis points or $750 a year or $62.50 a month. That $62.50 gets put into an escrow account along with their taxes
and insurance so they pay it as a part of their monthly payment. That money gets deposited into a savings account set up specifically for these loans for the member and they canít have access to it for five years. On the sixth year they can use 50% of the funds for home improvement
and after 10 years they have access to all of it. If at any time during these 10 years that they default, the money that is in the savings account will be applied to their principal balance, thus acting as self-funding insurance, but it was also intended as a great way to help people of modest means develop savings
because we all know our houses donít stay in perfect condition; we have to fix a roof, we have to replace that darn washer or dryer, or the refrigerator goes out at the worst possible time or flooring needs to be replaced. And our experience is that ways that you can help people of modest means save
money is a good thing. This product is not intended for everybody. It is only intended for borrowers at 150% of the HUD AMI, which is Average Median Income. You can look up your HUD AMI for your community. You can type it in and look at the HUD site for that. Weíre actually booking another
loan this month. We have $1.2 million on the books on this and this has also been a successful product. Iíll knock on wood; we havenít had a foreclosure on this product since. Overall I can say that it has been a wonderful experience really moving to become a CDFI and itís very humbling and rewarding
to do so. Vanessa Lowe: Robin, thank you. I want to drill in a little bit more into this product because I find it very interesting. Can you talk about the agreement that you have with Neighborhood Housing Services and after the loan is closed whatís the relationship that they have with the borrower, whatís the relationship that they have
with you, talk about that partnership a little bit more. Robin Romano: Certainly. The borrowers actually usually go to Neighborhood Housing Services first; theyíre there clients. We happen to be able to serve the same grouping of people. We are neighbors very close by. Neighborhood Housing Services is a full
lending unit so they actually do the processing of the loan. They send it to MariSol for underwriting. We underwrite it, give the conditions of what we want. Neighborhood Housing Services actually closes the loan. We do have a written agreement, a formal, legal written
agreement, for the self-funding PMI; thatís a part of the documents. The loan is funded in the MariSol name and then we allow our particular agreement is that we allow Neighborhood Housing Services to take the origination fee and then they also service the loan; we pay them a small fee to service the loan, so it helps them.
But the loans are ours so we do, well, we donít book them on our books; they are booked as an off bookloan type. Vanessa Lowe: Interesting. Robin Romano: So Neighborhood Housing Services still has a relationship with these borrowers but in order to have this loan they have to open an account at MariSol so that we can open the savings
account to put the self-funding deposits. And I have to say that almost everybody whoís opened an account has also opened a checking account. Itís been a very win-win situation for us. Vanessa Lowe: Great. Thank you so much. Robin Romano: Youíre welcome. Vanessa Lowe: All right, I want to remind everybody that you can submit your questions.
Remember, itís the red button at the bottom of your screen, that middle link, and it toggles to open up the Ask a Question bar so please send your questions and let us know who youíre asking. We have another survey. One moment. All right, weíre having a little technical difficulty here
so Iím going to ask for some assistance and then weíll get to our next survey. Iím pushing next. Give us one moment while we deal with this. All right, thereís our poll question; weíre pushing it out. Okay. Now
this question goes back to that conversation about low income designation, okay, so we want to find out – and again, this is a multi-selection survey so press any button that applies to you. Has your credit union been approved for low income designation, whether youíve accepted it
or not? Has your credit union accepted the low income designation? Has your credit union offered a second chance account or loan? Now weíre trying to find out of the products weíve talked about so far what kind of things are you all doing with that. Has your credit union offered a payday alternative loan and has your credit union offered classroom-based
financial education? We know most of you are certainly sitting down with your borrowers and going over credit reports but are you doing classroom-based financial education? And last is do you accept the ITIN and actually letís do both the ITIN and the MatrÌcula Consular, any alternative
identification tools like that – to open an account? So again, check all the buttons that apply to you and weíll check on the results. All right, weíve got quite a few responses so far; keep pressing your buttons. This is interesting. Okay. We refresh.
All right, Iím going to push the results over. Okay, so it looks like 15% have been approved for the low income designation, 26% have accepted it. And again, actually it looks like 28% have accepted the low income designation. It looks like 18% of you are offering some sort of
second chance account or loan; I know those are becoming more popular, so thatís great. And 22% have offered a payday loan alternative. Thatís interesting. 9.7% offering classroom-based financial education and 5.5% accepting essentially alternative identification. Thank you
for your responses. Okay, our last speaker is Paul Woodruff. Paul, Iím turning it over to you. Paul Woodruff: All right. Afternoon, everybody. Iím glad to be on this call and to share some information about what weíve been doing out here in St. Louis for the last couple of years. I think one of the important things just to
remember is the context of the conversation. Each of the speakers that youíve heard from have been talking about the steps that theyíre taking to build the capacity of their institution to better serve low income populations. We certainly have had to adhere to those same steps, building capacity, learning best practices, making some mistakes and learning from those
and then moving along, and so our journey has been really interesting and so weíll talk about that now. I think to set the context for what St. Louis Community has done you have to think back to the year 2007. We had a really pivotal decision to make and it came down to a choice of where we were going to start to
expand. Did we want to go out into the county outside of St. Louis city to serve a little bit more affluent population or did we want to dig our heels in deep in the city and a more urban setting where there were less options for folks, where unemployment was higher, where incomes were much lower. We
took the latter of those two choices and since then have experienced phenomenal growth, mostly because thereís so many institutions that overlook the underserved populations, donít see them as an opportunity to really do a lot of good in the community. So moving into this, just to give you a little bit of better context
about who we are, we are a Certified Community Development Financial Institution; we have been since 2009. Weíre also a low income designated credit union since 2009 as well. And as Robin had alluded to, we are members of the National Federation of Community Development Credit Unions. I canít sing enough praises for the Federation and I
have to say that many of the opportunities, or a great number in the last year or two, that have come to us have been generated through the Federation. These folks come from a variety of backgrounds, including the CDFI Fund and a variety of other community development settings and have a wide range of expertise. So if you are
considering looking into CDFI certification, I would certainly reach out to the Federation just to get some insight from them because theyíre definitely willing to help. The last thing that I didnít mention on there is that in 2010 the credit union formed its own 501(c)(3) nonprofit known as the St. Louis Community CU Foundation
and weíve been able to leverage our foundation to be able to expand the financial education resources in the community that Iím going to talk about in just a second. So more specifically about who we are, we were founded in 1942 as the St. Louis Teachers Credit Union. We were SEG based. In
the mid-90s we converted over to a community charter so that we could better serve the wider population in St. Louis city and county. And just an interesting note. I had mentioned in 2007 we decided to kind of change pace and that year we started to offer second chance checking accounts, credit
building loans, payday loan alternatives, title loan alternatives, many of the things that both of the previous speakers had talked about, and we went from having roughly 25,000 to 26,000 members in 2007 to today where we have 52,000 members. Itís thrilling in one sense but in the
other sense it can be daunting just considering the volume of transactions, the amount of traffic thatís going through our lobbies and all of the sort. So weíve been excited about that but itís also made us really kind of reconsider how do we want to best
serve the community. So Iíve drilled down to some more specific information on there. We received our low income designated in 2009 and as a part of that just a couple of years ago we reached out to NCUA to see what the percentage was of our members that
met the low income criteria and they came back to us with a staggering number. It turns out that almost 80% of our members live at 80% or less of the area median income. So out of our 52,000 members, 80% plus are considered low
income. That from an underwriting standpoint, that from qualifying members for accounts who may have past credit issues or ChexSystems issues is daunting again. But thatís why we utilize a risk-adjusted pricing model so that we can serve the market. Weíve
adjusted our appetite to take on more risk and in some recent reports that Iíve seen itís 50%, closer to 60%, of the loans that we have on our books thatís car loans, thatís personal loans, you name it are considered subprime. And so that has its challenges but itís
also very rewarding because we can see the fruits of our labor continually every day in and out. So the way that we define financial capability and we talk about this quite a bit is thereís a couple of lenses. The three areas that I wanted to talk to you all today about is number
one, our involvement with the CDFI Fund; the second are the payday loan alternatives that we offer, and then the third is somewhat of a unique approach that we have to better serving low income communities and thatís through our micro-branch initiative, which Iíll talk about in just a second.
So first letís dive into the CDFI Fund. We were certified in 2009 and we were very lucky. We received a $750,000 grant on our first go around, and those funds were set to cover loan loss reserves for a payday consolidation loan, otherwise known as the Payday Saver Loan. With this loan,
just some specifics, thereís no credit check; rather, a member has to have an account with us for six months or longer. Some of the other features with that is that what weíre trying to do is to combat the payday lenders in Missouri. The average payday interest loan rate is 444%
in our state and we know that many of our members have multiple loans, so weíve been able to use this to be able to consolidate over 700 loans now and be able to get people off of the treadmill of payday lending and get them into a healthier lending cycle. We do report payments from
this loan to the Credit Bureau so it also helps our members to be able to build credit so that they can get into some more mainstream products and along with that just to make sure that we can reinforce some of the needs that are in the community. Our target market in St. Louis is African-American; weíre about 80% plus
African-American in terms of that. And St. Louis has a very unsavory distinction of being one of the largest unbanked cities in the country; I think weíre number three now, so this is a real need thatís out there. Weíve been able to fill that with that grant. Just very briefly, in 2013 we were lucky again to receive an $847,000 grant,
again from the CDFI Fund, to cover loan loss reserves for automobile loans targeted towards low income populations that are having trouble getting a car so that they can get to work more easily. So weíre really excited about the progress as that moves forward. Weíve been establishing relationships with local workforce development agencies through
the city, through nonprofits and other outlets so that we can make sure that we can deploy those funds in the most effective way possible and have the greatest impact. Next weíre going to shift gears a little bit and talk more about the payday loan alternative that we have. Our program differs a little bit from Robinís program in that the way
that weíve set this up is that itís a $500 revolving line of credit, so itís available to our members as long as they have a balance available to them as they make payments. Again, thereís no credit check with this; we use the relationship that we have with our members to qualify them. And along with that we give our members
some choice. They can choose to have their repayment period for that $500 line be anywhere from as little as 90 days to 180 days. Weíve found that giving flexibility to our members helps to decrease risk but it also gives those members a little bit more ownership in that process. Many of these people have never had a mainstream loan
before and so with that we want to make sure that we can give them the best possible chance for success. We do have a forced savings component so every time a member takes an advance from their line of credit 10% of that amount goes into a secured savings account. So if a member were to come in and do a $500 advance, they would walk away from $450 and they would have
$50 set aside in their savings account. The only way that they access that is when theyíve paid off the loan and since we know that payday loans are cyclical – people use them time and time again thereís a propensity for our members to really build up a significant amount of savings. And so if you look at it by the numbers, currently on our books existing Freedom
loans or Freedom lines of credit, we have just over 5,200. And whatís interesting about that is that we ran a report recently and it showed that weíve got more than $5 million in that secured savings account, so $5 million spread out over those 5,000 loans. Thatís significant. A lot of people discount low income
populations and think that itís just impossible for this population to be able to save but I think that this product has really turned that on its head and weíve been giving people the opportunity to get out of those abuse predatory relationships. Now, I did talk about risk-adjusted pricing. The delinquency for
this product is a little bit higher; itís approximately 10% now, and our charge-offs annually are about 10% to 12%. The program is self-sustaining, though. We do make some money off of this and those proceeds are pumped back in to similar programs so that we can have long-term sustainability. Our members have found huge value in this and
thatís why we want to continue doing that. I mentioned the Payday Saver loan which we were able to start with that CDFI grant. What weíre looking to do as a next step forward is to be able to increase the amount that we can reconsolidate from $1,000 to up to $2,000. We have a small pilot program that weíre going to be running through one of our
micro-branches that weíll talk about in a second, but really weíve been able to take a lot of the lessons that weíve learned over the last couple of years and modify this program so that it best fits the membersí needs and it best fits our needs as an institution to survive. The third prong of that
development plan or the financial capability plan that I was talking about is our micro-branches. In 2011 we started an effort to be able to better reach our membership in places where very low income populations are frequently, so we look at
social service agencies, workforce development agencies, low cost/no cost healthcare facilities, and from that strategy we have deployed three micro-branches now. Now when I say micro I just mean in terms of the footprint of the actual branch. Inside of these branches we do every single thing that a big brick and
mortar branch would do – open accounts, close on loans, help members with issues. The first branch we opened up in 2011 was in a workforce development agency known as the Met Center. Itís been extremely powerful for us to be there because there are five six week classes that cycle through, so you have the same people there for five or six weeks,
and as they receive job training the branch manager that we have located there will assist in doing financial education training and then follow up with opening up accounts for people, many of whom are unbanked. And as everybody on this line has probably realized over the last couple of years, if you donít have direct deposit capability
you either canít get a job or you get forced into an expensive pay card option. So weíve been able to provide those opportunities to really build capacity for people, get them into an account and teach them how to responsibly use that. A second branch, micro branch, is about 300 square feet, incredibly small, and we
opened that up in a low cost/no cost healthcare facility. Itís gone gangbusters. We do about 30,000 transactions a year through that facility. Thatís a huge volume for such a tiny facility that doesnít have an ATM and doesnít have a drive through, so think about all the foot traffic that goes through there, but also the goodwill that we can
then leverage through the partner that we work with; weíre embedded inside of this healthcare facility. So we are able to establish a lot of trust with the community and to be able to work in a better capacity with them. Now the third branch – and Iíll get off of this micro branch initiative in just a second – is in a facility called the
Kingdom House. Kingdom House does wraparound services, so you think about energy assistance, development classes, Head Start Program for children, all of those things. The missing component was financial services and what we actually did to get this branch opened and again this about a 350 square
foot branch is that we found a bank partner, community bank, in the St. Louis region who didnít have the capacity to serve low income populations but really wanted to do something big. They knew that we had an expertise with this and so we were able to strike up a relationship with Carrollton Bank. Theyíre
about $1 billion in assets. And came to an agreement where over the next four years theyíre providing operational dollars to the tune of about $50,000 a year for us to be able to actually operate the Kingdom House branch. So thatís opened up the door wide open to a population that had no access to financial services to be able to have a comfortable
place to establish trust and to be able to use checking, savings account services, credit building loans inside of a facility that theyíre very comfortable with. And the relationship with the bank that we have could not be better; in fact, the community development officer that I work quite a bit with serves on the Foundation Board Iím the Director there
and so I have a unique relationship with this bank as well as some others who really would like to do something in a meaningful way that does not compete with us but allows us to do more. So over all of this I would say that probably financial education is one of the biggest pieces, biggest and most crucial pieces. In 2008 we really
decided to invest heavily in this area. As I mentioned, we subsequently formed the Foundation as another outlet to be able to support our efforts but we do financial education inside of our branch offices, inside of social service agencies. We do classes in the community just at large. We have online, we
have over the phone services – you name it, we do it. And one of the unique features, if you look down at the middle of the screen, is the CU Excel Center. This is an initiative that was initiated not only by St. Louis Community Credit Union but our Foundation as well as our bank partner, Carrollton Bank,
to be able to launch this. Itís a standalone 2,500 square foot facility in an underserved area. We opened up in 2012 and the purpose of the facility is to be able to provide a destination point for financial education, so think credit building classes, budgeting classes, home buying classes, small business classes,
but in addition to that weíve got partners from Enterprise Car Sales that come out and talk about the car buying process, people from the YWCA who come and talk about the issues that are faced by underserved women, local healthcare facilities that come out. So really itís filling multiple needs that are beyond just financial
education. And so through the process of delivering these services through the center, weíve served about 3,000 people since 2012 just at the CU Excel Center. But if you look at everything that we do in social service agencies and other affiliates throughout the community, since 2008 weíve reached just over 22,000 people. These are
people who really do appreciate the services we have, that have opened up account services with the credit union but have opened up loans with us. So really community development, it serves multiple aims; it helps the community but then it also can help to be a business development agent for you. Iíve got some pictures of some of the classes
that weíve done at the CU Excel Center. In that center picture, that was our ribbon cutting. Youíll notice that weíve got a lot of people there but we have our congressman, local state representatives, the city mayor from the little municipality that weíre based out of, and then youíll see that weíve got a number of people who are teaching classes
in the other subsequent pictures. This really is a group effort, a community effort. We couldnít do these types of things if we didnít have strong partnerships with social service agencies, with local governments, and now with local banks who support what we do. So some of the key lessons that weíve learned is that partnerships
are an absolute must. Thatís how weíve been able to better understand the ways in which we can serve the market in meaningful ways. Thatís how weíve opened the doors to be able to insert branches inside of social service agencies to better reach the market where it is. The second point is that you have to leverage the
demand for mainstream services in financially underserved areas. Iíve got to be honest. Thereís no competition in St. Louis in our urban core. Itís pretty much a an open landscape for us. A number of banks have participated in the Bank On movement in St. Louis. Last year they launched a two-year initiative where they wanted to
open up 20,000 accounts for unbanked populations. Theyíve opened up roughly 1,000 in one yearís time, so theyíve got a lot of work ahead of them. If you want to compare that with what we do, on a monthly basis we open up roughly 800 to 1,000 accounts – 800 to 1,000 accounts a month and most of those accounts are coming
from under banked and unbanked populations. So it gives you a clue as to where our branches are and to the types of products that we offer. And that goes to the point I mentioned earlier, utilizing a risk-adjusted pricing model. You know, listen, we are very careful about how we deploy loan products but weíre also cognizant
of the fact that if we donít adjust to the needs of the market we arenít going to be able to underwrite loans in underserved areas, so thatís been a huge part of us opening up to do second chance checking accounts, payday loan alternatives, title loan alternatives, those things. And through it all, through these basic principles weíve
realized that St. Louis Community Credit Union is absolutely more than just a financial institution. We provide mainstream financial services, we work cooperatively with our 501(c)(3) foundation to provide intensive financial education, and we are a destination point for consumer and financial and life skills education in the community.
So any questions anybody might have Iíd be happy to answer, but I appreciate your time and attention. Vanessa Lowe: Paul, thank you so very much. Okay, so we are about at an hour which is what we said we were going to use for us to talk and I hope that you have been submitting your questions. Weíll have both Kathryn and Diane reading
us some of those questions. Our speakers were Robin Romano, Paul Woodruff, and Jim Benson. Jim Benson was first, then Robin, then Paul, so when you submit your questions try to give us a heads up as to who you want to answer that question. All right, Iím going to turn it over to Kathryn now. Kathryn Baxter: Thank
you, Vanessa. To the audience, Iím getting ready to push out our survey to you so please as we go over our Q&A weíd appreciate it if you would do this survey. We do have quite a few questions and we definitely appreciate all of those that have been submitted and we still
have time for some more submissions if you have any. Weíre going to give the first question to Vanessa. Vanessa, a credit union wants to know this is Question Number 89- can you briefly explain how a credit union would achieve a low income designation? Vanessa
Lowe: Okay, so this was actually reviewed on some of the previous webinars that weíve had about this so if you go to the Videos and Webinars section of our website you will find the prior low income designated webinars and I believe the first one has the most detail about that.
In summary, right now thereís an automated process that is being done to test all credit unions to see if they meet the low income designated requirement and thatís done through an AIRES file during the examination and thatís done annually. The Office of Consumer
Protection manages those reviews and the process of notifying credit unions that they qualify or donít qualify so if you want more information about that you can get in touch with them. Kathryn Baxter: Okay. Thank you, Vanessa. The next question weíre going to give to Paul. Are you
ready, Paul? Paul Woodruff: I am. Kathryn Baxter: All right. Question Number 86, a credit union asks if we wanted to start financial classes, where would we get material to know what to teach? Paul Woodruff: Thatís a really good question. We started with curriculum from the National Credit Union
Foundation. I believe it was called Financial Education Classes in a Box. That was one quick outlet. I believe that some of the other materials that we have pulled from and in all honestly weíve started to develop our own curriculum over the last couple of years from these but the National Credit Union Foundation is a great
resource. I believe that NCUA has provided us with some curriculum as well. And then the other source that I would go to is the Money Smart curriculum which is offered through the FDIC. Those will give you a great starting point. And the last thing I would say with that is that if you are going to jump out to start to do some of these classes, use those materials as
guidance points but you really want to be able to tailor your message to the audience that youíre searching. If youíre just reading from those slides, nobodyís going to be engaged. So really work to tailor that to the audience and get enthusiastic about it and youíll have a lot of success. Kathryn Baxter: Okay, Paul, while we have you on Iím
going to turn the console over to Diane Rector. Sheís going to give you Question Number 85. Diane Rector: Hi, Paul. You mentioned that borrowers have 10% withheld from advanced and placed into a savings account. But if youíre holding funds, do you actually have the funds charged against
the bottom line? Paul Woodruff: If Iím reading this correctly, so if we are taking 10% from whatever is advanced from the line we do hold that. So whateverís in the secured savings account, we do hold that to mitigate some risk so if somebody does walk away without payment, the member does
not, per the agreement that we have, they donít have ownership to that. We do use that to cover some of the risk. Kathryn Baxter: Okay, thank you, Paul. Letís see if we can get Robin to answer a question. Are you on the call, Robin? Robin Romano: I am. Kathryn Baxter: Okay. A credit union wants to know
how did you market the second chance accounts and loans to get potential members to come in and apply. Robin Romano: Well, when we first offered them we had about 85% of our membership on direct deposit. We noticed that our members were going to payday lenders so
we had a product that we kind of marketed internally to our membership. But now we market it. I actually have a huge banner on the side of my building that markets the $500 loan. In addition we do a show every other week
on a local Spanish radio show going over various financial education and we talk about this product as a way to develop. And like the other two credit unions, we do a lot of financial education out into the community and this is a product we
always talk about to them as well. So big banners on the outside of the building has worked very effectively. People see it and they walk in. Kathryn Baxter: Just for clarification, is that a TV show or a radio show and is there a cost to that? Robin Romano: The radio show that we do go to, there is
a cost for that and itís on a local Spanish radio station. Itís an AM station that we do. Kathryn Baxter: Thank you. Diane Rector: Hi, this question is for Jim, Question Number 91. What is your fee and rate on payday loans? James Benson: The fee and rate depends because we do
risk-based lending, so the rate would be no more than, say, 18%. But weíre kind of trying to lower that so we actually lowered our unsecured loan rate so that actually the maximum is actually down to 14% and so that would be if you have the worst
credit. As far as fees, we kind of will waive those fees. Diane Rector: And while I have you on the line, do you charge application fees and, if so, how much? James Benson: We actually started charging that for the first time but, because what we donít want to get into
is these payday lending loans I donít want to be associated with that so basically weíre kind of waiving that and taking that money and going to put it into savings. Again, from listening today we need to come up with a percentage like Robin and Paul have
come up with; we need to incorporate that. So that money that they would give as a fee would possibly go into their savings and frozen there. Kathryn Baxter: Okay, thank you. Letís go to Paul. Are you there, Paul? Paul
Woodruff: I am. Kathryn Baxter: All right. We have a question here from a credit union that says do you have tailored financial education programs and how many staff are trained and deployed to provide this training? Paul Woodruff: Thatís a
great question. Thereís a couple answers to that. One is that inside of each of our branches our branch manager as well as some of our member service representative specialists, they are trained to do whatís called a Credit Checkup. Itís pretty simple. What we set up is that the members have the opportunity,
they make an appointment with the branch manager or the MSR ahead of time, and they go in, go in for the appointment, sit down. The branch manager or MSR will have a credit report with the score included. Theyíll go over that credit report with the member to explain to them how to read the report, understand if thereís any problems
on it how to fix some of those errors. Theyíll go over an amortization schedule to help members to understand if you have an interest rate on a car loan thatís 12% versus 8% youíre going to pay X number of dollars more. So thatís kind of the basic training that we have for staff who deal with a lot of those issues day in and day out, but the second
part is that the credit union and foundation jointly employ a full-time financial education specialist. We realize that thatís somewhat of a luxury. I mean, weíre a little bit bigger institution so we can take on that expense. But Jason McCall, who is our specialist, he is the one that is out continually day in, day out, teaching those services inside of
social service agencies. And some of our branch members will step in who have been trained by him, but really we have one specialist that focuses on it 100% and the rest of our branch has a basic understanding of how to counsel members. Diane Rector: Thank you. The next two questions are for Robin, Question Number 28 for
Robin. Robin Romano: Okay. Diane Rector: For the payday alternative loans, is anyone ever turned down? What would be the reasons for denial? Thatís the first one. Robin Romano: Thatís a great question. Yes, people are turned down. This is a loan that is not really based upon credit. When you
get into this type of loan, itís really based upon activity in either their savings or their checking account. We have found that to be the most useful way of determining payment because we donít pull credit history. So what weíre looking for is what monies are flowing in and out, where those
monies are going, and if other payday lenders are calling in or money is going elsewhere out to there. So a reason for the turndown would be usage f other payday lenders or being negative in their account a bit. We also offer overdraft privilege and in general we do not
allow members to use their overdraft privilege and do a Quick Loan thatís what we call this product – at the same time because we view that as robbing from Peter to pay Paul. So we do deny. It doesnít happen frequently. And we still charge them the
application fee. So when they give us their application, it better come with $50. I hope that answered your question. Diane Rector: Thanks, Robin. Question Number 27 goes to you as well. Are the forced savings balances held until the loan is paid in full? They canít access this
savings until the term of the loan expires? Robin Romano: Absolutely. Thatís absolutely correct. So that money is held into a separate savings account and it is held until the loan is paid in full, and we do not pay dividends on this particular account. Kathryn
Baxter: Okay, thank you, Robin. Now Iím going to give this question out to all of our speakers. Itís Question Number 105 and a credit union wants to know – this is a fantastic question how do you combat car dealers that say zero percent financing? James
Benson: This is Jim Benson from the Elliott Credit Union. I think one of the things and we get that all the time is we just really have to point out the numbers. A lot of times a dealership says hey, zero percent financing, but now the $18,000 car is $20,000, and I will run the numbers for them and
say look, but if you take a 1.9% loan with us weíll actually save you money and thatís kind of how we try to do it. We canít do it all the time because sometimes somebody with excellent credit will get the zero percent financing and all the rebates so we donít win them all, but we certainly can point out what we can. Thank you. Kathryn Baxter:
Okay. Robin Romano: This is Robin. Kathryn Baxter: Go ahead, Robin. Robin Romano: I would say my answer would be exactly the same thing, as pointing out that zero percent really doesnít mean zero percent. Weíve noticed in our market that the dealerships keep extending out these terms. Instead of 60 months being the most common term, we continue
to see 72 months. So we do the same exact thing. But I will say this. I donít see many of those zero percent financing because I donít have that many members that qualify for that. Paul Woodruff: This is Paul. I would say, yes, I mean, weíre in that category. Our members are severely financially distressed so the
opportunity to take advantage of that zero percent financing is probably not going to be very right for many but the last part is that itís just education. We let our members know what that real price is going to be and how they hide that. So the same as everybody else. Kathryn Baxter: Thank you very much
for those answers. Question Number 25 goes to Robin. Robin, do you have to have a certification to be able to host financial education instruction classes to your members? Robin Romano: No, you do not. In order to do counseling such as HUD counseling you
do have to be certified for that, but to teach financial education classes on general things, for example, there was a great question about where do you get materials. I looked at some of the very same materials that Paul did and weíve kind of developed our own as well.
And the things that we talk about are things that your loan officers talk to your members about every day credit, how to get it, what does the credit score mean, navigating how do I dispute credit, things like that. Those are things that you talk about on an everyday basis and weíve turned that around and
made those into presentations. We talk about basic banking and so forth, all of those things are things that you talk about every day. But there are specific things you do need to be certified – HUD counseling, foreclosure, that kind of stuff, there is a certification for that, to say that you are HUD
certified. I would offer at the end that, if they give out information our contact information, if somebody sends me an email and wants to see our credit class, our PowerPoint, Iím happy to share it with anyone. Kathryn Baxter: Okay, Robin, while we have you on the line again, hereís another question. A credit union is
interested in getting some details on your Start Again Checking Program. Robin Romano: I saw that question and Iíll be happy, if they would email to me, I would be happy to send – we do have guidelines for that. We do not pull credit on Start Again Checking; we only use ChexSystems and we do have specific guidelines. And
youíre catching me; I canít remember what all of those are. But I would be happy to share that with the individual, Melanie, if she wants to send me an email. Diane Rector: Thanks. Number 64 goes to Vanessa. What are the requirements to become a low income designated credit union? Vanessa Lowe: Thank you, Diane.
We touched on this before. Again, some of our prior webinars gave the details on that but briefly being low income designated requires that more than 50% of your members are low income as defined by NCUA. Let me start again because it looks like the mike wasnít on; I apologize. We covered that question a little bit
before. Remember, there are at least two other low income designation webinars that weíve done in the past, so if you look on the NCUA website under our past videos youíll find those. But briefly, the test looks to see if more than 50% of your membership meets the definition of low income. And that definition is
somewhat complex because what we look at is census data and a lot of different census fields in order to determine if that person is living in an area that demonstrates that the predominance of people there are low income. So thatís the brief answer but, again, the Office of Consumer Protection manages that more. Diane Rector: Vanessa,
just a follow up question. Can you tell us just briefly the benefits of being a low income designated credit union please? Vanessa Lowe: Well, youíll notice I started off talking about the grants and so those grants, the Community Development Revolving Loan Fund grants, are only for those credit unions that have both
been offered been told that they meet the criteria – and also accepted the low income designation. In addition to the grants we actually have a low interest loan also that is available only to low income designated credit unions. So those are the two main benefits that
credit unions like to take advantage of. Kathryn Baxter: Okay, we have a question that weíd like to give to all of our speakers. It involves being able to get underserved members off of traditional payday lenders, so the question is what has worked for
your institution and what hasnít and then, if itís worked, how do you keep them away from the payday lenders? So Iím opening this question up to all of our speakers, Question 53. Sorry. Paul Woodruff: I can jump out there. This is Paul. You know, this is the
real quandary because for a lot of folks in order to get them completely out of the payday lending cycle the real answer is to increase wages. It sounds really easy, right? But with our members, again, it goes back to education. The more that we can provide the resources that
they need to understand how to manage the money that they do have is a critical aspect to that. The second part is to be able to give them the capacity to save, so thatís the big reason why we do have a forced savings component with our payday loan alternative. Weíve had members that have really been able to leverage
that once theyíve saved a couple hundred dollars and these are folks that really have never had the chance to save hundreds of dollars at a time. I would like to say that weíve had huge success in getting people out of payday lenders; the real answer to that is that itís mixed. So we continue to try to refine that and the success
stories that we do have I think come from the education piece and then also the savings component that weíre helping our members with. Robin Romano: This is Robin. Weíve had a mix of people who use payday lenders. I donít want people to assume that only the poorest, most
underserved areas use payday lenders. While they certainly prey on these people, everyone uses payday lenders. So weíve had people who have A plus credit that we see payday lenders come through on. The Quick Loan has been very successful
and about 25% to 30% of the people who use Quick Loans to help either reestablish credit or obtain credit do graduate to other forms of unsecured credit beyond the Quick Loans. The forced savings on the Quick Loan product has probably been very
successful in that, to showing that someone that hey, I can save a little money so I donít have to reach out and make bad choices to be able to fix that washer or to get money to do something from that from alternative sources. We also use
forced savings sometimes in regular loans. If we have a member that is coming to us every eight to nine months to either do debt consolidation because they need money now to buy tires for their truck or whatever, we may set them up on a payment and put them
also on a forced savings, saying that a part of your, you know, weíre going to put into your payment that you have to put savings to money. So that savings aspect is very powerful in trying to help that. But the biggest power is really talking and having your loan officers talk
to these people so that they can see what itís costing them in the decisions and how much more money theyíre paying out on that. And then the other things is, what we have found, is that they want to have to stop. There are some people who will never stop and you need recognize
at some point at what time that you need to exit out of their lives because theyíre not going to stop that behavior. James Benson: This is Jim Benson. Iíll step in real quick since we are kind of new to this. But what we have seen is we try to work with – get people off of payday lenders
is, like Robin and Paul have said, we try to get them also on a payroll deduction if we can get them. And also Iíve seen people that are making good money that are going to payday lenders. I donít know why. What we try to do is to try to get them on a payroll deduction so that we can get them a loan so that we build
that relationship. And as Robin has said, there are some people that will just always do it and yes, we cut our ties because thereís nothing you can do. And thatís not in all cases. But in some cases we really have succeeded in helping people. I know today I run into people at Walmart, at different stores, and they say hey, Jim, yes, you remember how things
were? And Iím like yes, I know. Itís a good feeling to see that yes, we pulled them out of there and were able to get them to get back on track and those are those are the people that, okay, you got them on the payroll deduction, got them off of that vicious cycle. I mean, itís like I said; itís a case by case. You try to work with somebody
and say look, letís work on a budget and a lot of times that helps when we show them hey, look, youíve got to stop. So thank you. Kathryn Baxter: Okay. So the next question, Question Number 66, weíre going to give that to Vanessa. Vanessa, the credit union wants to know can they use
the NCUA grant to improve on some of the current products and services that they offer? Vanessa Lowe: Thank you, Kathryn. I saw that question and itís interesting. We have been getting a lot of demand for our grants as you can probably understand, particularly since so many more credit unions
receive the low income designation, so we are purposely really offering these funds for those groups that do not yet have these products and services. So it truly is first time offerings. The continuation of that says that the person might want to improve on their mobile banking or improve on bill pay systems. So we congratulate you for
getting those started and we really hope that you have available in your operating funds to really keep those programs going and improve on them, but we are trying to dedicate our funds to those who donít already have those programs and services. Kathryn Baxter: Thanks, Vanessa. This question goes to Robin, Question
Number 30. Does the self-funding private mortgage insurance account pay dividends? Robin Romano: Thatís a terrific question and I have to tell you we really debated on this one or not. We do not pay dividends on this particular account. Because it was insurance we felt
at its core that we werenít going to pay dividends, but thatís a debate we had long and hard on this. I think you can do no wrong, whether you pay dividends or not, but we do not. Kathryn Baxter: Okay, letís bounce the ball back to Vanessa, Question
Number 70. Iím sorry. Actually, letís stay with Vanessa anyway. Question Number 14, a credit union wants to know what is a SEG? Vanessa Lowe: Oh, thatís just the acronym for Select Employee Group, an old-fashioned credit union term meaning an employer base that you
get to sign up and then you get access to their employees as your membership. Kathryn Baxter: Okay, fantastic. While I have you, Vanessa, can I ask you Question Number 10, too? Apparently the credit union wants to know some information about the CDFI index and what is it and what role does it play in qualifying
for CDFI certification. Vanessa Lowe: Okay, thatís a good question and youíll find more guidance in the guidance material for the application, but essentially I can summarize that. In order to be certified by the CDFI Fund you actually need to show that 60% of your prior yearís products and
services have been provided to the low income community. Now there are different definitions of low income community. It could be demographics. Itís been shown by studies that African-Americans, Hispanics, Latinos often lack access to credit for reasons other than credit, so some of those are
sort of like okay, thatís a definition of underserved community. Low income meaning youíre serving people and have the data to show that youíre serving people who are below a certain Area Median Income, things like that. So thatís the main criteria demonstrating that, the predominance and actually 60%, not just more than 50%, have gone
to an underserved community. The other criteria and I will say that sometimes credit unions have trouble meeting even though they might be serving a large predominance of low income members is that you need to have documentation that demonstrates that your mission shows that you are dedicated to serving the underserved. And so what some
institutions have to do is they might have to pass another sort of bylaw statement that incorporates that in their mission because most financial institutions their mission is to provide financial services and so maybe changing that to provide financial services to the underserved market, something like that is needed to demonstrate.
Then the other criteria is like proving that youíre a financial institution; thatís a pretty easy swing for credit unions because you are regulated by NCUA. But the target market criteria demonstrating that youíve provided those 60% of services, that can be one of the tough hurdles to get over
because it requires quite a bit of analysis and data, and thatís why weíre offering the funds to help you hire a consultant to look at that. So I hope that answers the question. Kathryn Baxter: Okay. Thank you, Vanessa. I have a final question for our entire group here. The
question is do you run a credit report for your ATM card? James Benson: This is Jim Benson. Our ATM is actually linked to the Visa debit card and itís linked to the share draft so we do run the ChexSystems report, and thatís where
weíll start from, so thatís all. Paul Woodruff: This is Paul. We stopped offering just the standard ATM card. Everybody has a regular debit card that can access the ATM. But in answer to that, we donít use credit as a basis for qualification for the checking
account and thus the debit card, ATM card. And the other thing is with our accounts we can also overlook some blemishes on ChexSystems. So weíre liberal in that policy and if people canít qualify then we have some pay card options that are cheaper than some of the more expensive cards that exist out there.
Robin Romano: This is Robin. We do not run a credit report for the ATM or for the checking accounts. We do do ChexSystems for the ATM card. Weíve found that ChexSystems is a much better indicator of how somebody will run their account versus the credit report. We have found specific
in serving these particular markets that people treat their accounts much differently than they treat loans because they need those accounts desperately. So we donít run credit but we do run ChexSystems. Kathryn Baxter: All right. Well thank you, everyone, for joining us
for this particular webinar. Join us next week on the 22nd when we will have another exciting webinar, Examination Modernization. If we didnít answer your questions today, we certainly will answer them within the next few weeks and this webinar will be posted to our website in
approximately three weeks for on demand viewing. Once again thank you, audience, for tuning in. Thank you, Vanessa, thank you, speakers, and weíll see you all next week at 2:00 p. m. for
Examination Modernization. Have a great afternoon.

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