More than a year after unarmed teen ager Michael Brown was shot and killed by a white police officer in Ferguson, triggering rioting and looting, credit unions continue to help make a difference in this beleaguered suburb.
While some businesses might have looked for ways to get out of Ferguson, credit unions have actually made a point not only of staying, but moving into the area.
Credit Union Journal spoke with three credit unions with branches in the Ferguson area, including one whose branch overlooks the intersection where the rioting began, as well as one that added a new branch in Ferguson after the unrest.
All three spoke of a commitment to helping improving the community. Given the history and statistics of the area, they have their work cut out for them.
But credit unions may be just what the doctor ordered. A commission formed to study causes behind the rioting called for officials to strengthen poor minority communities' access to banking services and curtail predatory lending to reduce crime and poverty.
1st Financial FCU: A Helping Hand
1st Financial Federal Credit Union, a $207-million institution based in Wentzville, Mo. (about 30 miles west of Ferguson), did not witness any damage to its branches in the area, but Laura Woods, vice president of marketing and community presence said the CU wanted to help after seeing the immense need of local residents left reeling after the shooting and demonstrations.
"We have worked really hard over the last year to partner with programs that work directly with at-risk and low- income target markets, including residents of Ferguson," she said. For example, last year, 1st Financial participated in a program with the St. Louis Agency on Training and Education (part of the St. Louis Treasurer's Office) to provide financial literacy training to the participants of their Summer Youth Employment program.
"This program is funded by grants and private donations and goes directly towards the hiring of thousands of youths between the ages of 16 and 23 throughout St. Louis," Woods explained.
Initially, 1st Financial's plan was to create a financial literacy program that helped youths make better decisions with their money as they navigated their way through their first paychecks. "However, we quickly realized [the youths in the program] were exclusively being offered direct deposit as an option for payment, while approximately 90% of them had no previous banking relationship," she said. "As an easy alternative, they were relying on pre-paid debit cards to receive their paycheck. These cards were charging [them] $3 with every single swipe, not to mention countless other fees for common practices such as balance inquiries. We felt strongly they were being targeted unfairly, so we quickly went to work to create a free, non-custodial checking account to offer these youths as part of their job readiness training."
Now, she added, 1st Financial has partnered with many different government- and grant-funded job programs throughout St. Louis, offering financial literacy courses and products to help the community get out of "cycles of unhealthy" banking practices.
Woods emphasized that when speaking to case managers, her credit union insists that the first step for job readiness training is to have a healthy banking relationship. "Before the first application is filled out, the applicant needs to have an account number ready to give their new employer for a direct deposit," she said. "Otherwise, it becomes easy for a fee-generating predator to come take more of their hard earned money, month after month."
St. Louis Community CU: Good Neighbors
Another local credit union, St. Louis Community Credit Union, a $247-million St. Louis-based institution which opened a branch in Ferguson last October, has also stepped in to help.
"The events of summer 2014 did not cause us to rethink our decision of coming to Ferguson," said Paul Woodruff, VP-community development, St. Louis Community Credit Union. "If anything, it became even stronger. Our presence in Ferguson is so important. We needed to be there as part of our overall giveback to the community."
Woodruff noted that since opening the branch in Ferguson, the credit union has processed more than 54,900 transactions and opened more than 870 savings accounts. "We've helped our members secure more than $1.9 million in loans at the Ferguson location so far," he said. Moreover, the Ferguson branch is equipped with interactive teller machines and member service representative stations, along with expanded full-service drive-thru lanes.
The credit union has also developed programs to assist Ferguson residents with financial education and auto loans that will enable them to get better jobs; hired young people for intern positions; provided funding to agencies to assist in improving living conditions of residents; and offered financial education to young men in the community.
Noting that St. Louis Community CU is a Low-Income Designated (LID) credit union, Woodruff said about 81% of the CU's 50,000 members qualify as low-income. And since, low-income consumers with limited mainstream banking access or options could be drawn to alternative financial services, he added, "we make it a point to place our branches in financial services deserts and economically distressed communities."
Alliance CU: At Ground Zero
Alliance Credit Union, as $224-million institution based in Fenton (about 30 miles from Ferguson), found itself in the thick of last year's unrest and civil disturbances. One of their branches, located on the border between Ferguson and a town called Jennings, was closed for two days at the request of local law enforcement at the height of the riots.
"Our branch overlooks the intersection where the initial demonstrations began," said Frank Evans, VP of human resources at Alliance. "[But] none of our employees lost any pay during this time. When asked on the second day, they agreed unanimously [that] they wanted to re-open." No employee quit nor requested a transfer either. He added that the branch suffered no physical damage during the unrest, although other commercial buildings in the vicinity did.
Despite the violence the area witnessed, Alliance did not feel the need to upgrade its security at the Jennings branch. "After evaluating the situation, we agreed there was no need to change our security," Evans explained. "That branch has an excellent security track record, and is already served by a detail of off-duty police officers."
Evans further noted that the Jennings site is the credit union's largest and most well-established branch and had already established itself on the community long before the Brown killing—which is why it did not need to implement any outreach efforts to gain membership or provide additional services.
"Most of our members in that area are local residents; others commute to the area for jobs with several large employers," Evans said. "Most members are interested in the basic day-to-day financial services we offer: checking accounts, debit cards, payroll savings, auto and unsecured loans, mortgages, etc."
Evans indicated that there are actually quite a few banks in the Ferguson area, and several credit unions. "The question isn't one of access to the facility—it's about access to credit," he noted. "You can be surrounded by banks, but if none will give you a car loan or a checking account, they might as well be a million miles away."
Consequently, as in myriad other similar poor neighborhoods, Ferguson residents are vulnerable to payday lenders and other unscrupulous usurers.
"Payday lenders are prevalent on West Florissant Avenue [the main thoroughfare of Ferguson], where much of the unrest unfolded," Evans said. "Unfortunately, many of their customers could do better, but they've been convinced they'll never qualify for credit through non-predatory lenders."
Alliance has a low-income designation and is CDFI-certified, providing the CU with "a government-sanctioned 'safety net' against potential losses," Evans said, "which enables us to take on that underserved market without raising regulatory issues."
Something Alliance is very good at, he added, is making loans. "We have consistently maintained the highest loan-to-share ratio in the area, and this allows us to put that expertise to work for even more people," he stated.
As part of the CU's community outreach in the wake of the rioting, Alliance instituted a program last year to offer loans of up to $5,000 at 0% interest for up to 24 months. Evans said the credit union was approved to make 20 of those loans to small business impacted by the Ferguson unrest. "Our process allowed us to take the application, process the loan, and disburse the funds in as little as 30 minutes," he said. "Out of those 20 loans, I believe only one is in delinquency.
"We set the first payment 45 days out," Evans continued. "Our purpose was to give these businesses a shot of short-term operating capital, whether it was to make payroll or buy plywood."
Evans added that a state-sponsored coalition of banks offered a similar loan program, but it took months for them to disburse the funds, while Alliance was able to disburse within days. "I think Alliance showed what can happen when a good neighbor rolls up its sleeves and gets to work without waiting to be asked what to do," he commented. "We already had our CDFI program in place, we already knew the local business owners, and we were right there on the spot. We walked out the front of our branch and headed down the street, going door-to-door talking to business owners about our program. People know us and trust us. That still goes a long way around here."
Federation: CUs Matter
Pablo DeFilippi, vice president of membership and business development at The National Federation of Community Development Credit Unions, said credit unions are beacons of hope for financially underserved communities and consumers.
"1st Financial and St. Louis Community are terrific examples of how credit unions can and should respond to this type of situations, as they are working with a network of community-based organizations and public agencies to bring about economic development opportunities to the residents of Ferguson," he said.
But DeFilippi cautioned that the lack of access to responsible lenders is one of the biggest challenges faced by residents of low-income communities. "The growth experienced by many Community Development and CDFI-certified credit unions is a clear indication that if we as an industry adopt our business model to meet the needs of this demographic, the results are extremely positive both for the consumers and for the credit union," he said. "It's in the low income market where our mission of people helping people clearly overlaps with a business opportunity: mission and margin must go together."
