President Donald Trump’s executive order temporarily barring people from seven Muslim-majority countries from entering the United States has generated widespread outrage and protests, but it could also ultimately spur many immigrants and permanent U.S. residents to speed up their applications for U.S. citizenship – and that could pay real dividends for credit unions.
Many credit unions provide a service generally called “citizenship loans,” which help members pay for the costs associated with becoming an American, including paperwork and legal fees.
Notre Dame Federal Credit Union, a $488 million-asset institution based in Notre Dame, Ind., is one of the latest to go down that route. The credit union’s “Opportunity Loan” aims to provide financing for the expenses associated with seeking citizenship, permanent residency or deferred action for childhood arrivals.
“We received multiple requests from the community – including several local social service providers and community leaders – to help people afford the costs associated with becoming an American citizen or other immigration processing-related fees,” said Notre Dame FCU’s president and CEO Tom Gryp in a statement. “Our Opportunity Loan was specifically designed to meet that need.”
Under terms of the new loan, borrowers can apply for up to $3,500 for periods of 12, 18 or 24 months. Loan proceeds will be disbursed directly to the service providers.
Gryp told Credit Union Journal that it remains unclear how Trump’s ongoing immigration measures might impact citizenship loan programs offered by credit unions.
“However, to the extent the president’s actions increase visibility of these immigration issues within the impacted communities, I would think programs like ours will be perceived as a valuable tool in helping people improve their status,” he said. “It also may serve as a catalyst for people to initiate the process sooner than they otherwise would.”
Indiana is not usually thought of as a haven for immigrants, but according to the American Immigration Council, immigrants now account for about 4.8% of the state’s population (up from 1.7% in 1990, and 3.1% in 2000), while more than one-third of them are naturalized U.S. citizens.
Gryp also noted that Notre Dame FCU has received “a great deal of support” from social service agencies who work on these types of issues. But since the product was only rolled out recently and has not yet been widely publicized, it is too early to tell how popular it will be.
Big opportunity
There are about 42 million immigrants currently in the United States, according to Adam Lee, incubator director at the Filene Research Institute, which presents CUs with a significant opportunity for loan growth.
“Many credit unions across the United States have been very successful at providing essential financial services to immigrants and non-citizens for some time, which include citizenship loans and a variety of other products ranging from vehicle loans, credit cards and mortgages,” he said.
Moreover, Lee assured that Trump’s executive orders restricting immigration and halting federal funds to “sanctuary cities” do not appear to have any direct impact on the legality of serving these populations. One of the most recent initiatives aimed at serving those groups is Filene’s “Reaching Minority Households Incubator,” which is presently testing a “Non-Citizen Lending” program. Between July and December 2016, ten of the thirteen credit unions testing this program generated 750 loans totaling more than $8.9 million.
One CU participating in that effort is Portland, Ore.-based Point West CU. According to VP of Member Experience Steve Pagenstecher, “non-citizens have always been an essential part of our communities,” and his CU is taking an “optimistic approach” with the president’s executive order.
“Clearly, there are real fears given the rhetoric and early actions of the Trump administration,” he noted. “However, city and state leaders here in Oregon and around the country have stated their clear intentions to continue to provide safety and security to non-citizens by not assisting federal law enforcement with regards to immigration enforcement outside the confines of severe criminal activity.”
Pagenstecher asserted that Point West is committed to providing “accessible and affordable” financial services to everyone in its community, regardless of citizenship status. “The new administration doesn’t change that – if anything, it reinforces our commitment,” he emphasized.
Moreover, Pagenstecher believes that more immigrants might seek out citizenship loans and similar products in reaction to Trump’s provocative moves – and he would welcome such a development.
“We’ve been building [relationships] with community partners for years to bring comprehensive support to the underserved,” he stated. “These partners have deep-rooted… relationships with affected communities, including non-citizens, and we look forward to working with them to continue to bring affordable access to capital, including citizenship loans, to empower them not only financially, but as important members of our community.”
Point West CU members have been “incredibly supportive and positive” regarding its outreach to the non-citizen community, he added. “As a credit union with a long history of serving minority communities… serving the underserved is part of our DNA,” he elaborated.
Pagenstecher estimated that about 18% of Point West CU’s membership is Hispanic/Latino, primarily immigrants from Mexico.
And these citizenship loans have indeed been successful from a purely financial perspective. As of Dec. 31, 2016, Point West had more than $8.8 million in non-citizen loans in its portfolio, with a delinquency rate of 0% and a charge-off ratio of 0.34%.
“Those numbers are a reflection of the tireless work of our credit union team and the trust and support of our entire membership,” Pagenstecher said.
More than just Muslims
While credit unions are touting their willingness to assist immigrant and non-citizens, the for-profit banking world was slow to react to Trump’s executive order. As reported by American Banker, the big banks were slow to respond to the news, with some banks waiting nearly 24 hours or longer before coming out against the ban in varying tones. While some cited its implications for customers and employees – to say nothing of their presence in international markets – others, including Goldman Sachs, said it went against long-held company-wide policies of diversity and inclusion.
Trump’s order targets Muslim-majority countries, but Muslims aren’t the only group that might be applying for citizenship. As CU Journal has written, one of the biggest opportunities for credit union growth nationally is in the Hispanic market, as borne out by the success of
According to Pablo DeFilippi, SVP membership and network engagement at the National Federation of Community Development Credit Unions, Trump’s policies could present a major opportunity for credit unions – particularly with respect to Spanish-speaking communities.
DeFilippi said it’s imperative to recognize that a significant percentage of these households have family members with mixed status, where some may be citizens by birth or naturalization, while others may be permanent lawful residents and others may be undocumented. “As a result, we strongly believe that credit unions interested not only in meeting the needs of this demographic, but hoping to build lifelong relationships with the community, must fully embrace financial inclusion,” he said.
From a compliance point of view, he added, it’s critical to recognize that financial institutions in general, and credit unions in particular, already have the legal authority to open accounts to immigrants, regardless of their documentation.
“The Bank Secrecy Act provides the regulatory framework on the requirements of a customer-identification program,” he pointed out. “These regulations speak in general terms about the use of reliable government-issued identification. There are at least a couple of precedents where NCUA recognizes that a credit union may choose to use a Matricula Consular [an Identification card issued by the Mexican government] in connection with establishment and implementation of their customer identification program. In practice, a growing number of banks (including all the major nationals) and credit unions accept the Matricula Consular.”
Many credit unions, DeFilippi added, also accept other types of foreign government-issued passports.
“We believe that this presents a tremendous opportunity for credit unions, which in many communities will increasingly be looked to for answers, information and support by our members, particularly those most vulnerable,” he stated. “Credit unions are increasingly recognizing that the Hispanic market remains largely underserved by mainstream financial institutions. In many ways [our] future and relevance will be determined by how well we connect with this market – [one] that has already over $1 trillion dollars in purchasing power and will account for over 50% of future U.S. population growth.”
