Wis. CUs Recruiting Low-Income Tax Filers
In yet another new project to serve the underserved, the state's credit unions have joined with the banks and the Wisconsin Department of Revenue in an initiative aimed at signing up low- and moderate-income residents around the state to deposit accounts.
Representatives from as many as two dozen credit unions will travel with state officials over the next few weeks to sites being used for the Voluntary Income Tax Assistance program to try to dissuade participants from taking out costly tax Refund Anticipation Loans and instead to create electronic accounts with their local credit union, or bank, in order to receive rapid refunds from the state or federal government. The effective rates on some of the RALs can amount to as much as 500% a year, after considering fees and other costs for the two or three-week loans.
"Credit unions kind of stepped up to the plate to provide alternatives that are more cost-effective for them than the RALs," said Jim Drogue, vice president for operations for the Wisconsin CU League, which organized the credit unions' participation in the project. "Many of these unbanked individuals are not familiar with a financial institution and it's a matter of building relations with them."
Credit unions, many of which already offer their services and premises to the VITA program, see this new initiative as a point of access to extend their services to low- and moderate-income and other underserved people, according to Drogue.
Their message, according to Drogue, is it only takes a small deposit-as well as meeting field of membership eligibility-to open a basic account at a credit union. Most of the participating credit unions have broad community charters. The account can then be used to receive rapid tax refunds electronically, as quickly as within five days.
The VITA Program
The VITA program is an outgrowth of the Wisconsin league's REAL Solutions program, a project aimed at extending services to the underserserved which the league is conducting with the Filene Research Institute. The project-Relevant Effective Asset-building and Loyalty Producing-aims to study the needs of groups like low-income people, immigrants, Native Americans, unbanked, the disabled, and the elderly, and to develop necessary products and services to fill those needs, said Drogue. "We have a variety of products that we're developing," he said.
Among the needs identified are some of those articulated elsewhere but that are already being rolled out by Wisconsin credit unions. They include: multi-lingual assistance, payday loans, low-cost remittances, check-cashing and income tax assistance. For example, as many as 60 Wisconsin credit unions are already authorized to cash checks for non-members, according to Drogue. That is something that is occurring at a much slower pace in other states.
Some of the participating credit unions in the VITA recruitment effort are: Summit CU, Heartland CU, University of Wisconsin CU, First Service CU, Community First CU, Royal CU, 1st Community CU, CO-OP CU and Landmark CU. Covantage CU has established a VITA site serving the Menominee tribe of Native Americans.
The Wisconsin league plans to do a follow-up study of the VITA project to determine how successful they were in convincing participants to open new credit union or banks accounts and what kind of individuals were most susceptible to the efforts.