Stanford FCU, Other Groups Aid Start-Up CDCU

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Several credit unions, including nearby Stanford FCU, have joined with a charitable organization and local businesses in an attempt to establish a community development credit union in this impoverished section of the San Francisco Bay Area.

The effort is being spearheaded by John Liotti, CEO of the Northern California Urban Development Corp. (NCUDC). Liotti, a pastor and five-year resident of East Palo Alto, founded the organization to provide economic support and investment opportunities for residents of the city, which had the dubious distinction of being the murder capital of the United States on a per capita basis in 1992.

"I saw second- and third-generation poverty in East Palo Alto," he told The Credit Union Journal. "Economic issues are something that keeps people down. I had a wild idea for a non-profit that looks at systemic poverty issues and community development, and I wanted to found a credit union as part of that."

According to Liotti, when he presented his idea to a group of local business owners, they told him he was "nuts." Undeterred, he continued to search for ways to make it happen.

A Big Break

A big break came in July, when Joe Duran, CEO of Community Trust CU in Modesto, Calif., invited Liotti to a conference in San Francisco for the National Federation of Community Development Credit Unions. Liotti discovered other groups were putting together similar ventures in North Carolina, the Mississippi Delta region, Chicago and Los Angeles.

Plus, Duran's credit union was a model for what Liotti wanted to do. Duran said he has known Liotti for almost a decade.

"John lived in Modesto for many years, and he is a member of Community Trust Credit Union. He is very aware of what we are doing," Duran said.

Duran said he spoke with Liotti and fellow NCUDC board member Marc Prioleau about developing a strategic plan to put a credit union in East Palo Alto. "Their demographics are similar to ours," Duran reported. "Community Trust CU has $50 million in assets and about 12,000 members, roughly half of which are classified as low-income. About 70% of our members are Hispanic."

A Mentoring Opportunity

John R. Davis, CEO of Stanford FCU, said the NCUDC first approached his credit union with the idea of opening a branch in East Palo Alto. Davis said the experience the $640-million, 44,000-member CU had in the area indicated the prospects for growth would be better if a credit union came from within the community.

"The more we talked to the leaders from the NCUDC, the mayor, the vice-mayor and others, the more we felt it was the kind of grassroots effort we wanted to get involved with and mentor," said Davis. "NCUA talks about mentoring community development credit unions; we wanted to do it."

Davis said Stanford FCU will provide the community development CU with some start-up funds in the form of no-interest or low-interest deposits. "I will be encouraging other groups to do the same."

The effort to found the CU is in its "early developmental stages," Davis said. The NCUDC is working on the written plan, with help from advisors such as Stanford FCU. On Nov. 4, the groups hosted an informational breakfast meeting, which was attended by East Palo Alto's mayor and vice-mayor, along with representatives from Addison Avenue CU, Keypoint CU, San Mateo CU, Technology CU and Golden Bay FCU. Davis said all of the credit unions that showed up will consider offering assistance.

According to Davis, Stanford FCU's involvement in the project is an extension of the "people helping people" CU philosophy. He said the credit union wants to help the community prosper, and it wants to help people gain access to funds without having to resort to predatory lenders.

"Also, it is a 'Stanford thing,'" he said. "Stanford Federal Credit Union is very much a part of the Stanford community, and we have a long history of outreach in the greater community. Stanford University has a long list of outreach programs in East Palo Alto dating back to 1984. We have been working with Jean McCowan, Stanford University's director of community relations."

Liotti praised Stanford FCU's involvement as "amazing. They are only a few miles away, so there is a natural connection with the university and the credit union, John Davis has supplied many contacts."

Both Liotti and Davis said the goal is to have a branch open by December 2006.

The Next Step

Community Trust CU's Duran said the collaboration of many credit unions coming together to help found a CU in a distressed area is "substantial." He said Community Trust CU will offer its expertise and experience in helping the new credit union get started.

"I have a full-time grant writer, and will allow that person to help the East Palo Alto credit union find grants."

Duran said the next steps will include generating capital to cover start-up costs, choosing the technology and developing oversight. "The most critical thing is to get a groundswell of community support-which they have done a great job doing. They will need to target products that are important to the community, and they can benefit from our trial and error experience."

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