The face of America is changing, and with it the faces of credit union members. A population in which descendants of European immigrants dominate is slowly giving way to one far more diverse and in which people of Hispanic and Asian origins will grow significantly. Many credit union leaders, perhaps uncomfortable with people who are different from them, have taken few if any steps to reach out to these new populations. And as The Credit Union Journal has been the first to report in detail, the leadership of most credit unions and credit union trade associations continues to reflect the old, European (and male) model.
But other credit unions have seen the changes going on around them and have aggressively moved to promote membership to new immigrant groups. Other groups haven't bothered to wait for a credit union to come serve them; they've chartered their own credit unions.
In this issue, The Credit Union Journal launches a series examining these new Americans-how they are similar and how they are different-with a particular focus on what credit unions are doing and why they are doing it.
For credit unions considering an expansion of their FOM to serve new populations, below, a panel of credit union leaders with unique insights into these groups offer their thoughts and lessons learned:
The participants include: Lucia Moreno, CEO of Family CU, Wilmington, Calif.; Maurice Calderon, senior vice president of governmental affairs and community development for Arrowhead Central CU, San Bernardino, Calif.; Greg Kidwell, CEO, and Daniel Brown, Technology, Risk & Community Service Manager, with Big Bear/Members First Credit Union in Columbus, Ohio; Lily Lo, CEO, Northeast Community CU, San Francisco; George Poitou, COO with SCE FCU, Irwindale, Calif.; and Sue Helmriech, manager of outreach programs, Ohio CU League.
Q: What do credit unions most often misunderstand about immigrants, and what are you doing to change those perceptions?
Moreno: They have a fear that, because these people are immigrants, they are transient and they won't stay long enough to pay back a loan, or to save. Ninety-nine percent of our members are of Mexican origin, plus a few from Central America. Some of them do move on, but only because they have to -their housing situation changes, they lose their job, or they are migrant workers and follow their job.
But if they are happy with their credit union, they will keep coming. We have some members who have moved far away from the area, and we have no other branches, but they keep their account with us. The fact that they move is not indicative that they are not going to pay back their debts.
We are a small credit union- 4,800 members, $9.2 million in assets-and we don't have the advantage of technology, so we check references. Other credit unions might not even check personal references, but we call each one. We are looking for references who have been in one address for a while. When our members do move, we want to be able to get word to them.
Calderon: Most credit union personnel are adaptable with whoever comes in their doors and helps them become a member. However, there are some who need to understand something new, like the matricula card. The matricula is an identification card-it is not a visa, it is not a driver's license. We work closely with the Mexican consul and accept it as identification.
Kidwell & Brown: In Ohio over the last several years, there has been an increasing focus within the credit union movement on community outreach and serving those who would be considered as underserved in terms of financial services. Personally, we have never received anything other than encouragement and cooperation as we have embarked on our efforts to serve immigrants within our field of membership. In fact, all of our efforts in these areas have been conducted in collaboration with other credit unions in Central Ohio, which has really brought to life for us the true cooperative spirit of the credit union movement.
Lo: They think immigrants are a bad credit risk, but they don't realize how hard immigrants work. We are in the Chinatown section of San Francisco, so we have many Chinese immigrants as members, plus a few refugees from Vietnam. Most of our members work seven days a week, 10-12 hours a day-especially the refugees, who came into the country with nothing. We give these immigrants a loan, a savings account, and help them establish credit.
Poitou: They think the immigrant population is not profitable. We can clearly show that they are profitable accounts. The biggest problem credit unions have with chargeoffs is by mainstream, high-score borrowers who declare bankruptcy. First-generation immigrants are not familiar with the system. They have to work hard, they want to improve their lives and help their families-the last thing they want to do is declare bankruptcy.
Another thing: many credit unions are not familiar with the culture of immigrants, so they just don't want to get into it.
One thing SCE is doing is I talk to every person I can about serving the underserved market, especially the Hispanic market. We use ourselves as an example that it can be done. We opened a branch in Boyle Heights a couple of years ago that serves almost exclusively first- generation immigrants from Mexico, plus a few people from Honduras. We have a total of three branches that serve underserved areas.
What do immigrants most often misunderstand about credit unions?
Moreno: We have to spend quite a bit of time educating them what a credit union is. We teach them that it is a cooperative, and everyone is in it together. If they don't pay a loan back, then that hurts everybody. If they don't make savings deposits, we won't have money to loan out.
I think we do a good job, and our members are very loyal to us.
Calderon: Most people coming from Mexico have a great distrust of financial institutions. They have seen them fold up or be taken over by the government, and they have seen people lose their life's savings.
Immigrants are private people, and good savers, but they would rather risk having a crime committed upon them than put their money in a financial institution. They often have too much cash on them-either stuffed in a mattress or buried in a can. We need to work with them and show them there are better things to do with their money than sitting in a can in their back yard.
Kidwell & Brown: Generally speaking, many immigrants come to the United States with perceptions of mistrust regarding financial institutions, due to experiences that they have faced in their native countries. As we make efforts to provide personal financial education to immigrant groups, we focus on trying to build trust with people. Many times, people are fearful and mistrustful of things that they don't understand. By providing courses in personal financial education and the basics of the United States financial system, we try to take away that fear and uncertainty. At the same time, we make sure that we provide people with the financial services that we teach them to expect from us.
Lo: They don't know what a credit union is, so we have to educate them.
Poitou: For people from Mexico especially, they come from an area where banks and other financial institutions are not to be trusted. There is built-in negativity. They don't participate in financial institutions, and they don't know how to use them.
Education is the most important thing we can do. We want to help them improve their lot in life through financial literacy.
What difference can be seen between first and second generation immigrants?
Moreno: The longer someone has been in the United States, the more they act like the average consumer. Things like living on credit, having excessive credit and taking advantage of bankruptcy.
The first generation is more loyal, and will stick with their first credit union. The second and third generation realizes they can go anywhere.
Calderon: A lot! Many people in the second generation can speak English and are well assimilated. The first generation is very loyal-once they get in the door, they will stick with you. The second generation will go wherever they can get the best deal-and who can blame them?
Kidwell & Brown: Most of the immigrant groups that we serve are first generation; hence the more critical need for personal financial education and the basics of the U.S. financial system. Quite frankly, we have not been working in this area long enough to determine differences in financial behavior between first and second generations. Our main focus has been on educating and serving the first generation of immigrants that are currently in our field of membership. However, we can't help but feel that, as a result of the education and services that we are providing, we are laying the foundation for a second generation that will understand and utilize credit unions as their financial service provider. Universally, children learn from the experiences of their parents. This seems to be true regardless of nationality or ethnicity.
Lo: There is a big difference. The first generation has never heard of a credit union and they think we are the same as a bank. The second generation has heard of us, but since we are a small CU that offers only basic services, many of them move along.
Poitou: The second generation has lived here, so they have experienced having a checking account or financing for a car. They accept the financial system in the U.S., because it is not new to them, as it is to the first generation.
What relationship is there between the second generation and their parents, and is there any loyalty?
Calderon: We often see the second generation helping out the first generation. Immigrants are hard-working folks, very committed to education. They want their children to be sheltered and fed.
Lo: No, there isn't a lot of loyalty, because the second generation moves on. We don't have checking accounts or ATMs. The first generation is happy to have a savings account-we help them pay their rent and utilities in cash directly to their landlord and the utility
Poitou: Any time you build trust, it is a good thing. If you can build trust in the first generation, that helps bring in the second. Or if you build trust with the second generation, that helps with subsequent generations.
Helmreich: Without question, most second-generation (immigrants) believe their parents did it right-and it doesn't matter what ethnic group you're talking about. We see when we go into high schools and colleges to talk to people, we find that if their parents spend a lot, they spend a lot. If their parents save, they save. Unfortunately, that's why bankruptcies keep going up.
Do you sponsor financial literacy programs, and do they work?
Moreno: We try to offer our members three things: a place to save, a place to get a loan, and education. Many immigrants are low income, so it is important that they use money in the right way.
Every three to four weeks, we hold educational sessions in our lobby. We have had seminars on car purchasing, auto insurance, home purchasing, how to budget, how to get out of debt, how to survive the holidays without ending up in debt, and how and why to prepare a tax return. These classes are very basic, and most are in Spanish.
We don't know everything about these topics. We prepare the outline and set up the workshops, but we work with others. For example, we bring in people from an insurance company to explain to our members how to get insurance for their children's cars, how one car will cost more than another, things like that. Sometimes the people we bring in aren't sure why they are doing it, but after they are thanked repeatedly by people who genuinely appreciate it, then they can't wait to come back again.
Calderon: We offer classes, but there are a lot of other ways to help, also. We have had classes on home buying, savings, and how to use the IRnet wire transfer service. We use materials from other programs. We blend different programs together into what we like. We hold some classes in the branch, but most are held elsewhere-in the neighborhoods where members live, at the consul's office, or in churches. We have similar outreach and educational programs for the black community.
Kidwell & Brown: We have found that utilizing materials provided to us by The Ohio State University Cooperative Extension Service in a group setting of up to 30 people is most effective. What truly makes these materials effective is that they are translated into the native language of the group that we are working with, and used in conjunction with instruction provided by a person with an educational background and of the same ethnicity as the group that we are working with.
Lo: We offer workshops on credit, loans, and the difference between a credit union and a bank. Our staff develops these workshops, plus we always have an outside speaker.
Poitou : We have classes, but not as many or as often as we would like to. We are increasing our budget for financial literacy programs in general, especially to the Hispanic market.
We are working with the California Credit Union League on different programs. Also, we are using money from the U.S. Treasury's First Account grant program.
We do have some materials we developed ourselves-on subjects like maintaining a checking account, building credit and buying a home. All of these materials are in Spanish.
We hold seminars in the community in conjunction with local organizations such as the Madres de Este de Los Angeles (Mothers of East Los Angeles). These organizations bring their members to us.
We believe financial literacy education is the most important thing we can do, both for the community and the credit union, which is why we are really ramping it up in 2003. The more people become educated, the more likely they are to become members, and active members.
Do your immigrant members have interest in member business services?
Moreno: We have never done business loans. We only started offering checking accounts in the last year and a half. We have done classes on starting one's own business, and I know a few of our members have small shops or sell cars. Certainly some of our signature loans are used by gardeners or sewing shop owners to buy equipment, but I am not in a position to judge a business and issue business loans.
Calderon: Yes, but only after they've scoped out the organization. They want to hear from their neighbors that they have gotten a loan and things worked out. Member business loans are something we've just recently gotten into.
Kidwell & Brown: Once again, our focus currently is on providing basic personal financial education. However, as we have learned about the Somali population here in Central Ohio, they are very entrepreneurial, and many Somali immigrants have started their own businesses. As we continue to serve the Somali population, we can see that there will be some opportunities to provide member business services to this part of the community.
Lo: We offer business loans, but we don't have a lot of money to loan. Our loans are $5,000 to $50,000, but for a $50,000 loan, we have to have some collateral. Most members who want a business loan are looking for $5,000 to $10,000, so we are able to meet their needs.
Poitou : There is a desire, but we don't currently offer business accounts. We meet regularly with groups from the community, and different members, and this is something that they have expressed an interest in.
There is a lot of interest in helping minorities open businesses. We are looking into ways to work with the Small Business Administration to get government guarantees for these businesses.
Helmreich: "These communities really need business lending service but the credit unions aren't ready to handle it. Credit unions talk about it a lot, but they aren't doing much of it. It's risky, lending policies are complicated and regulators impose a lot of restrictions. Are the requests reasonable? I think they are. It's ashame that we can't respond to them.''
In defense of the Somalis, she said, "These people are going to stay in these businesses for a least 20 years or one generation. That's a pretty long time to work with during planning sessions.''