Cannon Financial Federal Credit Union sees its adoption of underserved fields of membership in this Orange County city as a two-way streeet.
Jess Lawson said the credit union-which on May 23 was granted approval for a name change from Cannon Electric FCU-has multiple SEGs spread out all over Southern California. The underserved FOM it adopted consists of 48 Census Bureau zone tracts, which include virtually all of Santa Ana and a small part of neighboring Tustin.
"We wanted to expand our field of membership in areas of the community around the credit union, especially with people identified as underserved by bank products," he said. "Santa Ana has a large percentage of Latinos. The average income level in the city, as measured by the Census Bureau, is around the poverty level. Any opportunity to increase deposits and loans to the credit union is a positive, as is providing check-cashing and wire-transfer services-two services needed by the underserved population."
Cannon Financial FCU has had to delay the rollout of many of its marketing efforts due to two factors. In addition to the name change, it is preparing to move its headquarters branch to a new location a few blocks away. Lawson said once those changes are complete, the CU has a full slate of events scheduled.
This month, CFFCU will announce its move and commence an advertising campaign in the local Spanish-language newspapers. Lawson said it will begin with an "image" ad that defines the credit union, followed by product-specific ads. In addition, representatives will be going door-to-door delivering a handout with an offer to entice people to come into the branch.
"We will have a one-year marketing program," he said. "We will be able to deliver the handouts to specific census tracts, and we will be able to track the response from each tract."
When the new headquarters branch is open, the credit union will co-host an open house with the city of Santa Ana. Lawson said the city played a "critical" role in developing the underserved FOM program, providing valuable assistance.
The CU's member service guide is in English, but it has a section with Spanish translations. All in-branch notices are in both English and Spanish, as are the audio-response telephone system, the ATMs and the home-banking product.
"The entire staff, with the exception of yours truly, is bilingual," said Lawson.
Cannon Financial FCU has developed several products for the underserved market. These include check cashing, wire transfers, and loans for first-time borrowers that accept alternative collateral.
Lawson said the latter is something "that allows the credit union to reach out; to offer loans to people who might not otherwise be able to get one because they don't have sufficient credit. Because they are defined as underserved, a bank might turn them down out of hand. But what they really need is a special review of their situation."
CFFCU also is looking at its own version of a payday loan.
Puncturing Stereotypes
Cannon Financial FCU received approval from NCUA to adopt the local underserved FOM in July 2003. Since then, Lawson said it has learned that many stereotypes about the low-income market are untrue. Specifically, that "poor" equals "unemployed."
"Most of the individuals we see are working, because we go to employers," he said. "On the other hand, it is true that many newly arrived immigrants don't know how to get a Social Security number or an individual taxpayer ID number. We don't do this for them, but we help them find the information by directing them to the appropriate office. And, we've realigned the process of accepting identification to include the Matricula Consular card as an ID for new accounts."
According to Lawson, the perception the underserved do not understand how the system works contains a kernel of truth. He said the credit union's job is to teach them, and thereby get them out of the check-cashing stores.
"When dealing with the underserved, we provide services within the confines of law and decency, and we educate them so they know there is an alternative."
Towards this end, CFFCU has a long-term plan to develop a series of financial literacy seminars. Topics will include how to use a checking account, how to apply for loans, and how to set up IRAs and certificates of deposits-with an explanation of why saving is important.
Lawson said the credit union plans to bring in outside vendors such as Enterprise and Autoland to explain the car-buying process, including how to apply for an auto loan.
"People newly entering the financial world don't always know how things like buying a car work- things that are commonplace to others. The same applies to checking accounts-people don't know the benefits of a checking account or a debit card."
Cannon Financial FCU has not yet measured the profitability of the underserved FOM, but Lawson said based on the example of other credit unions that have adopted an underserved market -including SCE FCU, which Cannon Financial consulted with-it expects to be successful.
"Not everything is in place yet, especially since we are moving, but even without a major effort, we've established a pretty good flow of new members just by word of mouth. We know it is going to work, we just have to get everything set up."
Less than a year into serving the local area, CFFCU's board does not yet include a member of the underserved FOM, but Lawson described it as "well-mixed." He said the board includes Latinos who live in Santa Ana.
Lawson encouraged other credit unions considering adopting an underserved FOM to do so. He said NCUA gives a "cookie cutter," and if the CU answers all the questions and follows through, "there is no reason why it shouldn't work."
The most difficult part, he related, is working through the Census Bureau tract system. The CU had to build a map tract by tract-a process he described as very time consuming.
"It is a good deal of work, but the potential reward for the work a credit union puts in far exceeds that. There are underserved tracts all over California that other credit unions could adopt," he said.
