Best Practices of Serving the Underserved

1
Best Practices of Serving the Underserved

• Presented by
• Rufino Carbajal Jr.
• West Texas Credit Union
• 545 N. Americas Dr.
• El Paso, Texas 79907
• Phone [phone] ext. 206
• e-mail rcarbajal_at_wtcu-ep.org

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Unbanked Households in the U.S.

• Approximately 10 percent of households in the
  United States are "unbanked," and
• Most of these individuals predominantly come from
  low-income households
• Many of whom are the New Americansimmigrants

3
Hispanic population

• According to the U.S. Census Bureau 35 million
  people of Hispanic origin reside in the country.
  
• More than 70 of the U.S. Hispanic population
  lives in Texas, California, Florida and New
  York. 

4
Bad experiences with Banking

• Many foreign-born are inexperienced with the
  banking system in their homeland
• Those that have had any banking experience for
  the most part have been unpleasant

5
No trust in banking

• There is no trust in the banking system
• These individuals utilize high-cost services
  offered by payday lenders
• As a result, they spend billions of dollars at
  check cashers and payday lenders

6
Alternative to the Underserved

• Credit Unions must reach out to the Community
  with services that help improve the economic and
  social well being of members

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Building Trust

• We must build their trust by letting them know
  that credit unions are different
• We need to get involved in local outreach efforts
  and participate in holiday events
• Develop family marketing material. Family ties
  are very important

8
Language and cultural differences

• Language and cultural differences will be the
  greatest barriers to overcome
• Not only should we know the language but also
  understand the culture

9
Bilingual Services

• Hire staff that speaks the language and
• Staff that understand the culture. If possible
  staff that was raised within this culture.
• Offer bilingual services newsletter, loan
• applications, forms, voice response, etc.

10
Counseling and Financial Literacy

• Education is very important. Provide counseling
  and financial literacy to the community
• Teach the difference between credit unions
• and other financial institutions

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Building Partnerships

• Partner-up with agencies, business and non-
• profit organizations to improve the housing and
  economic development in the community
• Form CUSOs to bring in affordable financial
• services to the underserved areas of the
  community

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Affordable Financial Services

• Offers financial services that fit the
  underserved market. Services such as Check
  Cashing, Money Orders, Small Loans, Free Notary
  Service, Christmas Club Accounts
• AND always encourage savings. Be aware that any
  savings that lower-income families undertake runs
  the risk of disqualifying them from eligibility
  to government assistance such as Supplemental
  Security Income, food stamps, Medicaid, etc.

13
Check Cashing

• Offer check cashing services at affordable fees
  in comparison to check cashing outlets
• Besides providing a service it also brings the
  member into the credit union and gives you the
  opportunity to educate and market other services.

14
Risk Based Lending

• Risk Based Loans is to help as many members as
  possible. Underwriting loans is very important
• Recognize that C,D, and E paper loans have a
  greater risk so these loans are made at a higher
  interest rate

15
Open-End Lines of Credit

• Offer small lines of credit and allow members the
  access to funds at their convenience.
• Open-End loans will keep them away from the
  payday lenders and most important minimizes the
  workload to processors
• The risk is basically the same.

16
Overdraft Privileges

• Offer Overdraft Privilege (ODP) a structured
  way for credit unions to allow its members to
  overdraw their draft accounts
• It benefits members who live paycheck to paycheck
  thus keeping them away from check cashing and
  payday lenders.

17
IDA PROGRAM

• Offer Individual Development Accounts (IDA). It
  builds the capacity of individuals and families
  to decide their futures
• The Credit Union can administer or partner with a
  Community Development Corporation (CDC) and
  serve as a the depository institution.

18
Remittances

• Provide International Remittance Network (IRnet)
  services, an inexpensive way to wire money to
  family in Mexico, or other countries at an
  affordable price. Billions of dollars pour into
  Mexico and other Latin America countries each
  year in the form of remittances It is important
  to keep in mind that while these immigrants might
  be sending a small percentage of their earnings
  home, the bulk remains right here in the U.S.  It
  is estimated that U.S. immigrants earned 450
  billion in 2003, sending 30 billion home, which
  means approximately 93 percent of their earnings
  remained in the U.S. economy. 

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First Accounts

• The First Accounts program is made possible by
  grants by the U.S. Department of the Treasury
  geared towards moving a maximum number of
  unbanked low-and moderate-income individuals to
  a banked status.

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Non Resident Members

• Boards must make the decision to accept the
  Matricula Consular (Matricula). The card meets
  all the requirements set out in regulations by
  the Treasury Department
• If a member is not a U.S. Person with a SSN, a
  form W-8BEN in lieu of the W-9 is furnished.
  Serving non resident members can be an
  opportunity for credit unions.

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Services to Colonias

• Colonias referred to impoverished residential
  areas along the U.S. and Mexico border area. The
  majority of the residents are unbanked
• Partner-up with the non-profits attempting to
  improve life styles in the Colonias. Offer
  credit union services to both the residents and
  the non-profit.

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Convenience

• Convenience is an enormous part of service.
  Opening offices in the underserved areas will
  make it possible for residents (many of whom are
  unbanked) access to financial services
• Studies indicate that if the credit union is not
  conveniently located residents will not travel to
  the credit union. The expense to travel is not
  worth the savings

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Services to the Underserved

• Will be labor intensive and expenses will be high
• Expect a higher asset yield, a lower cost of
  funds, but a healthier ROA.
• Delinquencies, and charge offs are frequently
  higher

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Conclusion

• In conclusion whether through First Accounts,
  IDAs, financial literacy, affordable housing,
  credit unions must stand ready to meet this very
  important challenge
• Most important serving the underserved can be
  economically rewarding to the community and also
  to the credit union.