There is a gaping hole in the financial system in North Minneapolis, where people are preyed upon by payday lenders and fringe bankers, according to Debra Hurston, executive director of the Association for Black Economic Power. Hurston is creating a credit union for this community to help break residents out of a cycle of exploitation and debt. But the issue is far bigger than one city, and the opportunity is one that any bank or credit union can seize.
Transcription:
Daniel Wolfe: (00:00) Good afternoon, everyone. And welcome to Leaders. I'm Daniel Wolf with American banker, and I'm here today with Debra Hurston, executive director for the Association for Black Economic Power in Minnesota, who is working to launch the state's first new credit union in about a decade. Now I know a lot of the people in our audience aren't credit union people, you're bankers, regulators, fintechs, other organizations in the broader financial services industry. And I promise you, this conversation is for you. We'll talk about the broader issues that created a banking desert in north Minneapolis and what that means for you and the industry as a whole, as you work to rebuild your trust with these communities. So please Debra, tell us who you are, the story behind your new credit union and what your experience has taught you about the state of the financial services industry in Minneapolis and beyond.
Debra Hurston (00:56): Thank you, Daniel. Thank you so much for this opportunity. I do represent the organization that north Minneapolis residents created to specifically address the banking desert, if you will. I bring a strong association management background to this project and it has been an absolutely amazing journey. The residents of north Minneapolis started this back in 2016 with the death of Philando Castile and they moved forward through the process of creating the credit union. And as you mentioned, it had not been, a credit union hadn't been created in Minneapolis in over 10 years, but the reason for the credit union was the payday lenders — was and is — the existence of payday lenders who are literally taking 400% on every loan and the economic injustice that the community members are currently experiencing had been experiencing or are still experiencing, was not being addressed — was and is not being addressed by traditional banking facilities. The community members realized that no cavalry was coming to save them, not banks, not credit unions. And they were left to be preyed on by payday lenders. And so they created my organization to give birth to a credit union that was specifically designed to combat payday lenders.
Daniel Wolfe (02:56): So when we were one of the things that stuck out to me, when we were planning this conversation was I had proposed the title building trust from zero. And your immediate response was no, zero is too high already. Can you talk to me about just where things stand with this audience in north Minneapolis and where, what work you need to do just to get back to zero?
Debra Hurston (03:20): Yes. The reason that I said that is that zero, to me, is a spot where there's no relationship. It's zero it's neutral, and with minorities and the banking community it is less than zero. And realizing that a number of my supporters are banks, but the relationship that the profession, the industry has with minorities in general is amazingly dismal. Minorities in general don't have the luxury of walking into a financial institution and enjoying a respected relationship. There is a walking on eggshells, wondering if you are being sized up and if you will measure up to that perception; when you walk through the door, is there a feeling of being welcome or are you judged? And with recent revelations of using minorities to position an organization on DEI [Diversity, Equity and Inclusion], this is nothing new. It's just new in the media, but every time it hits the air it takes you further beyond zero, as opposed to coming closer to an equal playing field. And as long as institutions ignore that this is happening, we can't get to zero. The first step in addressing any problem is to admit that there's a problem, identify your role in that problem, and then work to come up with solutions for that problem. But as long as institutions are denying that there is a problem and their role in that problem, there's no getting to zero. You can't gain people's trust if you can't admit that there's a problem.
Daniel Wolfe (05:53): And what we were talking about beforehand, there was specifically in the New York Times last week, there was an article about Wells Fargo's wealth management practice, how they had been asking folks to interview, quote, unquote, diverse candidates non-white non-male candidates, but had already filled the positions. And were just interviewing folks for fake jobs. And even if this was confined to a portion of the bank, and even if this was for a specific group of people, it still sends a very strong message. And when we had been discussing it, you pointed out rightfully it's not about sending a message. It's a message that the community has already been hearing for years and years and years. And that this basically just reiterates the message that they've been hearing.
Debra Hurston (06:39): You know, that's absolutely correct. Minorities have known, particularly Blacks have known that these types of things have been going on for some time. And for me, it's akin to videos now, giving people a bird's eye view of what minorities experience, oftentimes when you interact with the police. If the videos weren't there, people wouldn't believe it because it's been going on forever. And now the same thing with financial institutions, what minorities have been experiencing has been going on forever. The broader community needs to realize it and be a part of the solution. Banks need to realize it, all financial institutions need to realize it, admit that it's happening and come up with solutions. But if you can't admit that this is happening and your role in it, we cannot get to zero.
Daniel Wolfe (07:57): So when we first met face to face, we'd already covered what your organization was doing in the paper. But I don't think just reading our story, that I really understood the passion, the empathy, everything you brought to what you're doing and seeing you in person talk about it and just this outpouring of empathy and frustration and everything had just really, you know, made me want to introduce you to other people and make sure that the people talking to you and us today got a chance to interact with you and hear it directly from you. And so, part of what you were talking about then was the injustice that you see in the north Minneapolis community. And can you talk a bit about what it's like to be a bank customer, or somebody who wants to access any financial services in north Minneapolis today?
Debra Hurston (08:49): Yeah. It's a cautious walk because you're anticipating a "no," because that's what history has taught you. That if you need help, the answer's gonna be "no." What people in north Minneapolis, our focus area is, as I mentioned earlier, it's riddled with payday lenders, what they need, what, what north Minneapolis residents, many of them need is an opportunity to fill a gap. And where is that opportunity to fill a gap without being shackled to a debt for years and years and years? So for instance, and many people, this is not a part of their reality. They've had opportunities, so they don't see this, but it is real. You have a flat tire, you need tires, you can't afford to go get tires. So you go get a loan. That loan for those tires, so you can get your car situated so you can go to work, will cost you 400% of what you just borrowed.
Debra Hurston (10:07): And so you're never out of debt. That debt — so that you can keep going from paycheck to paycheck to paycheck —that debt now takes you beyond paycheck; lower than paycheck to paycheck, to paycheck. That is a reality that many people don't understand. They don't understand that there is no discretionary income. There is no income that you can park away for a rainy day, because every day is a rainy day. You just don't have it. And so there's a portion of our community that needs an opportunity. They need just a little help to make it through that one catastrophe without being shackled to a debt for years and years and years. They need opportunity and they need assistance on how to plan so that in the event that something like that happens, they have created a little nest egg so that they can can pull from that nest egg. In north Minneapolis, that doesn't exist.
There's an overabundance of fringe banking systems that exist. And this credit union is designed to address that. What the north Minneapolis residents and, you know, and I would say that north Minneapolis is not unique. Just look around these types of communities are all over the place. There's great opportunity for well-meaning financial institutions to provide quality service if they value the customers. And so no cavalry was coming to north Minneapolis to address these issues. And these issues are no secret. No one was hiding them from anyone. The community was screaming, "We need help." And they decided to give birth to a credit union to address their needs. So my advice to any financial institution is to look at these communities and come up with a way to form a positive working relationship.
Daniel Wolfe (12:25): I wanted to also mention that you've been doing these town hall meetings to, to build that trust within your own community. And so I've been able to hear the progress that you've been making by listening in and hearing about you attracting donation, not donation, uh, deposit pledges from residents, people who would qualify to be members of the credit union, but it's not just the individual members. You're able to get pledges from other institutions, the broader financial services community has a way to help you out. Can you talk a bit about how that community has participated in the creation of your credit union?
Debra Hurston (13:04): Oh, absolutely. The community came together, um, in gather. Um, and as I mentioned earlier to create ABEP, the association for Black economic power, but part of the community's role with this initiative is to lend their voice to it so that the regulators know that the community still wants it. And so the way that they lend their voice is to pledge their support on our, on our website. And in addition to the individual person pledging their support, we have been able to garner support through pledges from the broader financial community. So for instance, the Minnesota credit union network has established a campaign for us where credit unions have leaned in, and they have committed millions of dollars in deposit pledges. They've also committed operating capital for the credit union. One of the things that is happening — not in north Minneapolis but it's happening in the area — is Minnesota has its first Black bank. [It] came in from Detroit, First Independence Bank. It's a very good thing. First Independence was ushered in and aided in by a group of banks. Wonderful thing. The credit union community is doing the exact same thing with my credit union for this community. And it is a wonderful thing to see that banks came together to bring in Minnesota's first Black bank. And the credit union industry is doing the exact same thing with this particular credit union.
Daniel Wolfe (15:03): And you had mentioned of course, that the north Minneapolis community is not unique in the issues, the need for a local community institution like the one that you're creating. Can you talk a bit about, if anybody who's watching us today is in the process of, or thinking about starting a new bank or credit union, what have you learned along the way, and what advice would you give to them and what setbacks should they expect?
Debra Hurston (15:30): North Minneapolis is not unique in what's happening to them. What is unique is how they are addressing it. And if anyone decides to create a credit union, I would, I would never have attempted this without a team of experts supporting me. I would say banking, credit unions are one of the most heavily regulated industries. Of course you can imagine when you're dealing with money, it should be. But when you're creating a new credit union, you need experts standing with you for every functional area of the credit union chartering process. The Minnesota credit union network has been tremendous with providing that expertise. I would encourage anyone if they're thinking about doing this, be patient and the road is gonna be long, it's gonna be hard and you cannot give up. Just keep moving forward.
Every step forward will pay tremendously. And so for me, it's an absolute labor of love. There's no stopping this because if you, I can't not do it because there's no one in line to do this after me. And I see, I live, I understand what the community is going through. And so I'm in this til we get it done. I have a relationship with the community. I'm a part of the community, and this is an absolute passion that no one else, no cavalry was coming and we have to do this ourselves. Luckily we were able to pull in partners from the American, the African American credit union coalition and the Minnesota credit union network. But this was given birth to by the local community and the local community absolutely deserves it. And so I am extremely humbled by the support. I wouldn't want to take this journey without them, but there's no way I would attempt it alone.
Daniel Wolfe (18:17): And speaking of the community, I'd mentioned before, you've had these online town hall meetings, and I am glad that I was able to attend a few of them because I learned so much about not just what goes on when you're starting a new credit union or bank, but also just the progress you're making the steps along the way, your timeline and everything. And there were definitely some interesting discussions. You had guest speakers, educating folks on the process and where things stand and able to take their questions. And I'm hoping you can talk a bit more about that level of community engagement, because if I see any, like if I see a bank is opening down the street, or what have you, I don't know how to interact with those folks. I don't know how to, until they open their doors, which as you said, is just a long and difficult process to even get to that point, how to interact with them, how to see if they meet my needs or if they can help me with anything, but being able to engage with the community in this way, how has that helped with the process? What have you taken away from that experience?
Debra Hurston (19:15): You know, what I, the community is patient, and I would have to say that they want us to keep moving forward. When I first started this process, we had an opportunity to partner with a number of credit unions, which would have made this lift so much easier. The community, in one of the initial town hall meetings, asked us to forge ahead alone, meaning they did not want a partnership. They wanted this to be a Black-led credit union. To partner would have been a much easier lift. I will have loved the option to stand on the shoulders of one of our established credit unions in a partnership. But the community wanted us to not take the easy road to get this done, and to stay the course, stay focused and to establish a Black-led credit union.
The community has been, you know, I can't think of another way to say it. They've been abused. They've been abused, they've been neglected. And now there is a huge element of mistrust that starting from less than zero is alive and well there. And they want a Black-led credit union so that when they come as members, they open up the door, they feel like they're at home. It's more than just a financial institution. It's a huge source of pride. They want this to be a financial institution, a community center. They want it to be so much more than just a credit union. And it will be, but the community has a lot of pride. They have needs and they feel neglected. And so shortcutting them on this is not an option.
Daniel Wolfe (21:44): We're starting to get questions from the audience. And I do want to encourage folks. I know traditionally we say, oh, wait til the end with your questions, but you don't need to wait til the end. We can see them right away. That's one of the the nice things about doing this digitally. And so I wanted to read this question to you. I'll read it verbatim: "Thank you for your work in this critical space. Our bank is dedicated to serving the unbanked and underbanked. We're trying to understand the personas of people that use payday loans. One aspect of payday loans is that they don't show up on credit reports, which is important to their clients. How are your products addressing the needs of these payday clients?" And you haven't opened your doors yet? So, forward-looking
Debra Hurston (22:28): So what people who use payday lenders need is no-to-low interest, small loans, and they also need your respect. And so just offering a product and, I'm not saying that that respect isn't gonna come, but people need to come in and get service and pass on the shame. They don't need to be looked down on, discouraged or any of that. They need to know that you understand their situation, that you can walk that journey with them and lead them to their next priority. That's what people need. It's, I can't explain to people how important it is to be seen. When your experience, the majority experience is when you walk through a door, is that you are seen. For minorities, you walk through a door, and if you're seen; first, you may not be seen. And then if you're seen you carry a negative stigma that is imposed on you. Financial institutions need to figure out how to deal with that because it's there. And if you don't think it is there, that's part of the problem. Because it is there, minorities know it's there, and they're looking for ways where they don't have to deal with that.
Daniel Wolfe (24:21): I'm reminded of many years ago, I was listening to a radio story about check-cashing stores versus checking accounts. And the reporter was talking to somebody waiting in line who had both, you know, they were waiting in line at a check-cashing store but they had a checking account. And the reporter was trying to convince this person that they should just deposit their check in their checking account, doing the math, you know, the back of the envelope math to show them that it's cheaper than paying the fees and the person who was in line at the check-cashing store said, well, at least these folks, they have their fees posted. There's no surprises or anything like that. And it spoke to me at least in terms of just the need for transparency, the need for honesty, that even if you know, the math wasn't working out in their favor, they at least understood where they stood with the folks who were willing to work with them. And so I can see that, that respect, that transparency, that communication, regardless of where it comes from is something they value. And that if you wanna provide it, from a service that is not, or from an organization that is not going to keep them in a cycle of debt, then you're able to do that. And you have to bring the transparency and the respect with you.
Debra Hurston (25:32): There is a huge element of mistrust or lack of trust of financial institutions in the minority, community. And with minorities, we anticipate that I'm gonna walk into a financial institution and the rate that I need on this loan's gonna be higher than what you, for instance, Daniel, would walk in and get the exact same thing. There's this expectation that that's going to happen. And so, no matter how I dress up, no matter how proper I try to use the English language, no matter how my resume looks, no matter how high my credit score, the perception is based in reality for some of us that when I come out of that financial institution, if I get a loan that I'm gonna pay more for that than you did.
Daniel Wolfe (26:45): One of the questions that came in while we were talking just now, about the fees that we were talking [about] just now is, how much does the legacy of predatory or otherwise overdraft fees on bank accounts still impact trust in people who would be applying for a bank account or credit union ... I didn't mean to use bank as a catchall.
Debra Hurston (27:14): So are you asking how much would the legacy of, uh, a relationship with a payday lender impact the person's relationship with the credit union?
Daniel Wolfe (27:22): No, I think the question is just about the fees the banks charge. There's a lot of pressure right now on overdraft fees and banks reducing or doing away with them as well. And I think in the example that I was talking about of the radio interview that I heard, the assumption was that the person in line didn't know what their fees would be, that if they overdrew their account, that would be a surprise. That would be a gotcha. And they would rather pay more for the certainty than pay less for the uncertainty. So whatever bad experience somebody may have had in the past, whether it's overdraft fees or some other surprise fee, how does that now affect their willingness to work with you and that rebuilding of trust?
Debra Hurston (28:03): To me that would fall under education. Banks are a business and they do charge fees. Now, how are they educating their public, their customers on those fees? And with the credit union, we believe even though the credit union isn't open, we believe the education begins at day one. At day one of that relationship, there should be no surprises. There should be no "oops" moments. And so if banks or any financial institution, you know, and I don't wanna just single out banks, but if financial institutions aren't educating their customers, their members on the fees that they have, and the expectations that they have with regard to how people are managing those accounts, the relationship is never gonna work. It's never gonna improve. People are always gonna ... feel as if it's an "I got you" moment, or that this is designed to separate me from my money. That's the line that travels through minority communities: The institutions are in place with the sole purpose of separating me from my money. That's how it works.
Daniel Wolfe (29:40): Another question that in — I'm liking all these questions by the way, folks, please continue asking questions — one is about the charter for the credit union, anyone in the radius, eligible for membership, or I guess who is eligible for membership and what is your marketing plan to reach the community to let them know your doors have opened?
Debra Hurston (30:00):
Oh, very good. Uh, the field of membership for the credit union is anyone who lives, works, goes to school, worships, or volunteers in Hennepin or Ramsey counties, Minnesota, or businesses in that same area, or anyone related to anyone in that area. We will have a ... marketing plan that focuses on the target market, as well as the general community. We will market products and services; the credit union will start out as a consumer lending institution first, because the regulators want you to take a very conservative approach. And so business lending won't be one of our offerings. So they want us to take a very conservative approach, but we will be taking on the payday lenders. So we will be deploying tools specifically targeted at payday lenders in the market, as well as addressing the broader community.
And a lot of the broader community, they could go anywhere and do their banking, their financial institution. We believe that a large chunk of the broader community wants to be a part of an institution that's about positive change. We believe that the broader community wants to support an institution that is all about lifting people up and helping them be productive parts of society. That's why we believe a broader part of the community who does have choices will elect to support this credit union because they want to be a part of something great that's changing lives.
Daniel Wolfe (31:57): Okay. So you did mention that — and we're getting a few more questions in, but I did want to not rush past this one point — you did mention that right now, you have to be focused on consumer financial services and not business financial services, but my expectation, if you talk to any, you know, banker that lends within their community, they see that as a point of pride and a way to really build in and invest in the community. Do you have a long-term plan for that? Can you talk about just how that fits into your overall model, or is that just way too soon to discuss at this point?
Debra Hurston (32:29): How the business plan fits into our overall model or the consumer ...
Daniel Wolfe (32:32): How business customers, how, what your approach will be once that regulatory constraint is lifted.
Debra Hurston (32:39): Oh, absolutely. Well, even before the regulatory constraint is lifted, if a person comes into the credit union and they want business services, we will be partnering with financial institutions that provide business services and adopt to the same cooperative priorities of the credit union. And so we won't be turning people away and saying, no, that's not available. We will be offering them other institutions and resources that can meet their needs too. The business part of our offerings will more than likely unfold near the end of the second year. And there will be small-business lending opportunities.
Daniel Wolfe (33:38): All right. So, like I said, we are getting a few more questions. We've only got like about 10 minutes left, I think for questions. So please get your questions in soon, because I think it might actually take us that long to get through the ones we have. There's a few questions about financial education and literacy. One of the, um, questions keep refreshing. I can't keep up with them. One of the questions is about educating members about more complex financial products like loan rates, mortgages, personal loans, to instill confidence in advance that a fair rate is being given. What needs to be communicated in advance to build or rebuild that trust that, that brings them into your doors, into your branch?
Debra Hurston (34:18): Absolutely. And I'd say that well less — I don't have the statistic right in front of me, —but well less than half the population, the minority population in north Minneapolis owns a home. So there's lots of opportunity there. We will be partnering with community-based organizations that do home ownership education. So if a person comes into the credit union for a home loan, we will recommend that they go through the home ownership education programs as we get them qualified for the loan. So it's not just a, "can you apply"? but, "do you understand all the elements of owning a home and the requirements for this loan?" So it's a journey that we are eagerly, that we will eagerly take with our customers. And so there'll certainly be home ownership education, but there'll be some basic education too. Some people don't know how to manage an account. And so we'll be educating them about that to provide those types of services as well. And then some people have financial trauma. And so we'll be providing education on how tomove from financial trauma to stability. And then some people have never invested and we'll be providing information and resources on what that looks like too. A big missing ingredient in many minority families is the ability to transfer wealth from one generation to the next. And that will be a critical part of the education that we share with our members as well. And what it looks like, what your financial life looks like for every single stage of your life, and what it currently looks like and what you would like it to look like. And the different products and services that we offer, or that we can work with community organizations on to provide you with. And so it's, the credit union will be a partner with its members on it, on their financial life's journey. It's not transactional.
Daniel Wolfe (37:12): Okay. There's one question I like here, because I it's reminding me of some of the discussions you had at the town hall meetings where you were discussing just the very step by step process of opening a bank or credit union, right down to the technology you need to have in place, the people you need to have in place. I'll read this question verbatim, what role or assistance can vendors or other institutions and financial services offer; any suggestions on how to offer services to the credit union in the spirit of partnership?
Debra Hurston (37:42): You know, we have, we've come a long way on the journey. And right now, I'd say for other financial institutions, it's, we are so far on our journey we're just about done. And so it's, we're almost past that point now. I have to tell you, the need isn't getting the word out. Oh, you know what, let me just back up, there is one need. So when there was a question about the marketing, having a marketing focus that understands how to embrace the minority community is a challenge, particularly in Minnesota. That's a need that I have right now. And so if there, if someone knows, if a financial institution knows of a marketing outlet that has that skill set, I would love to know about it. Because marketing to the general community is different from marketing financial products and services to a minority community. And if a current financial institution has that resource in their back pocket, I'd love to know about it.
Daniel Wolfe (39:18): Awesome. Cool. I hope somebody watching us is able to help out with that. I'm gonna combine a few more questions just in the interest of time, about education again ... actually, yeah, let's go with this one. What is, um, in terms of financial education, is that just going to be a part of like marketing to direct potential members, or is there a way to reach out to young people, teach financial literacy in schools? Is that part of it?
Debra Hurston (39:46): You know, that is absolutely part of the plan. We will have relationships with the school districts, the teachers directly, with the churches. I believe that the earlier you can start people out with understanding the relationship with money and how money is, can be a tool that earns money for you, I think the better. And the earlier that we can get people to understand that that money more than represents what you can buy, it represents how you spend your life. And so if you are standing on your feet and you're making $12 an hour, but you want to buy something, let's just say gym shoes, $200. How many hours does somebody have to stand up to buy $200 gym shoes? And so educating people on the true value of that dollar and the power that that dollar has over what you do with your time, over what you can do with your life in the future and how that dollar can turn itself into other resources, educating people about all of that is what we plan to do.
Daniel Wolfe (41:33): Okay ... I think this is gonna be our last question just because of time. But since we did talk before about hiring practices at a particular bank, one person is asking, can you talk about your own hiring practices, how they might be different from even a traditional credit union or a bank. How can you identify the employees that can best meet the needs of your community?
Debra Hurston (42:03): You know, we do it the way a lot of organizations do it. And so again, the credit union isn't formed, but then in my organization, what I do is of course, you look at the resume, you look at the person's skill sets and you look at their connection to the community. And so with regard to the credit union, a huge connection to the community is warranted. You have to understand the journey that the members are taking. With regard to my organization, you need to understand what economic power looks like and what it doesn't look like. You have to live and breathe. It. You don't necessarily have to be a minority to do it, but you do need to understand what it looks like and what it looks like when it's not there.
Daniel Wolfe (43:01): Okay. So let folks know how they can follow your story and how they can attend the town halls online like I mentioned, or support you in any other way.
Debra Hurston (43:13): You know what, the first thing I would love if people could do is to go to learnaboutvillage.org and fill out the community survey. I can be reached on that website as well. If you have any questions, comments, concerns, please feel free to reach out to me directly. If you have any questions, I'd be happy to address them. This has been a, again, a labor of love. I like to be as transparent as possible. And, I appreciate the support.
Daniel Wolfe (43:56): All right, well, thank you so much for taking the time to talk with us today, Debra, I always learn a lot hearing from you and I hope that our audience did as well, and that other people in the financial community can help out, not just with the creation of your credit union, but also just addressing the broader need in other communities as well.
Debra Hurston (44:14): Thank you very much, Daniel, for this opportunity. There is a huge need out there, and I do hope that financial institutions in general will take a look at that need and see how they can play a role in addressing it.
Daniel Wolfe (44:33): Thanks again. And thanks to everybody who joined us.
