Two Years After Planting, Niche Blossoms For TULIP

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The credit union mantra- people helping people-is well known to anyone reading this publication. But TULIP Credit Union here takes it a step further than most: providing small loans to those with few other options, and offering financial literacy assistance to all of its members.

After 10 years of discussion and development, TULIP CU-the name stands for Thurston Union of Low-Income People-opened its doors Dec. 15, 2003. It serves residents of Thurston County who earn no more than 80% of the national median income. In addition, membership in the credit union is open to the 14,000 participants in the Olympia Food Coop, a membership grocery store for people of all income levels.

As the CU nears the end of its second full year, CEO Darlene Morales told The Credit Union Journal TULIP makes a lot of loans no other financial institution would want.

Who's Doing The Borrowing

"Almost half of our loans, 42%, are to people with credit scores between 500 and 700," she said. "As a start-up, we have restrictions on what loans we can do. We do unsecured loans from $250 up to $1,000, plus secured loans on things such as autos for up to $25,000."

Because the majority of its auto loans involve high-mileage used cars, TULIP's average auto loan is approximately $8,000, Morales said. The borrower's interest rate is risk-based on credit score: the better the credit, the better the rate.

"What makes us different is we put evaluating character back into it," Morales said. "We know the stories of every person who comes in to open an account: who they are, what their intentions are. Some have poor credit. Some have made mistakes in their past. These people are intimidated by financial institutions, and they need a little more handholding in the application procedure."

TULIP takes an educational approach with every member, she continued. "Financial literacy is not just for low-income people. Some people make a lot of money, but don't handle it well."

For example, one member-who Morales said has a good amount of disposable income-recently asked for $1,000 to pay off collection accounts. In talking to the member, it was discovered the amount owed to collectors was more than $1,000. Instead of making the loan, TULIP will take another tack. "If we made that loan, it would have been a Band-aid - just another debt the person owed. We will sit down with the member and discuss where they are, what they owe and how to get out of it."

TULIP only can suggest and teach so much, she added. "It is still up to the individual to take that action. We tell members the only person responsible for their finances is them."

Two of Washington's largest credit unions- Washington State Employees Credit Union and BECU-have been instrumental in helping TULIP get founded and continue to operate. Morales said WSECU supplied staffing during start-up, and continues to give support in the key areas of technology and accounting. BECU supplied start-up capital, and a member of its management team served, until recently, as a board member.

TULIP is a cashless operation, so members conduct transactions at a BECU ATM at TULIP's headquarters. TULIP members can use any WSECU or BECU ATM without fee.

One of the ways TULIP gives back to its local area is through its partnerships with social services organizations such as Community Youth Services and the Emergency Shelter Network. Morales said she and other representatives from the credit union developed classes on basic life skills such as budgeting and using a checking account.

Both organizations sponsored a series of classes in June. TULIP will return to Community Youth Services-an organization that helps older youth transition from foster care to living on their own-in November to teach financial basics.

While 70% of TULIP's members are low-income, Morales said it does not seek to just serve that demographic. In fact, high-income members are welcome as their deposits underwrite the lending. "We are looking for folks who want to make an impact on their community by doing their banking with us."

TULIP recently passed 600 members. Morales said total assets are $2.3 million-all but $400,000 of which are non-member deposits. "Other credit unions deposit money so we can lend. That's really the credit union spirit."

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