According to a survey by the FDIC, 25.6 percent of American households do not have a checking or savings account, and so are considered financially underserved. Among the most common financially underserved groups are the poor, the young, non-English speakers and small business owners, who can't get the loans they need despite credit worthiness. The number of underserved is growing even among the middle class, who are experiencing declining credit worthiness, rising loan delinquencies and foreclosures, and personal bankruptcies.
The cost of being underserved can be staggering, as people in this category are often forced to borrow money from predatory non-traditional institutions such as payday lenders or check cashing services. On average, these loans have a 400 percent annual interest rate that includes fees.
On the other hand, almost everyone can join a credit union, where the annual percentage rate on small-dollar loans is capped at 36 percent. And, credit union borrowers do not have to pay a lump sum within a short period, as is the case with a payday loan or a checking account overdraft fee. Credit unions offer fairly priced loans to members with imperfect, limited or no credit history.
In addition, credit unions have always played the important role of helping develop financial literacy, teaching their members how to plan, how to save and how to build credit.
One example of this is Express Credit Union of Seattle, Wash. Express CU has deployed four community member service representatives (CMSR) to 12 local non-profit organizations in order to offer better access to financial services to the underserved, including organizations dedicated to helping the homeless and entrepreneurs seeking to start businesses in financially distressed areas.
"We want to offer people smarter options when it comes to managing their money," said Norma Hernandez, President/CEO of Express CU. "We have doubled our membership in the year since we initiated this program, with 40 percent of the new members signing up through our CMSRs.
During on-site office hours for the CMSRs, visitors to the non-profits can open accounts, deposit checks, apply for loans and discuss financial matters. The CMSRs also provide basic financial education and referrals to formal programs offered through their non-profit partners.
Cash transactions, however, are not supported at these non-profit locations. Express CU's solution underscores the cooperative, resource-sharing that is characteristic of the credit union industry. Express CU is partnering with CO-OP Financial Services, a credit union service organization based in Rancho Cucamonga, Calif., to offer their members ATM access and shared branching locations.
Through CO-OP Network, Express CU now provides its members with access to more than 150 ATMs in Seattle, 1,000 in Washington and 28,000 nationwide, 9,000 of which access deposits. The partnership also expands the number of branches Express CU's members can use, from one to 18 locations in the Seattle area, 155 in the State of Washington and 4,000 nationwide through CO-OP Shared Branching. With shared branching, multiple credit unions collaborate to allow their members to complete financial transactions just as if they were in their own dedicated branch.
"CO-OP plays a key role in our outreach program," said Hernandez. "About 90 percent of our new members would not be able to use our services without the convenient access they have to ATMs and branches provided by CO-OP Network and CO-OP Shared Branching."
"Communities with healthy financial markets are stronger and more sustainable," said Stan Hollen, President/CEO of CO-OP. "Millions of members, particularly those with lower incomes and net worth, benefit greatly from the affordable and accessible services of credit unions."
About CO-OP Financial Services
Based in Rancho Cucamonga, Calif., CO-OP Financial Services is the industry leader in access and convenience products for credit unions. Nearing 30 years of credit union service, CO-OP connects credit union members to their accounts through network services, payment processing, e-commerce, CO-OP Shared Branching and call center services. With a total of 3,000 credit union members, 30 million cardholders, 28,000 surcharge-free ATMs, 4,000 shared branch locations and 160 million-plus monthly transactions, CO-OP Financial Services is the nation's largest credit union service organization, offering the tools, counsel and leadership to help credit unions prosper. To learn more, visit www.co-opfs.org. Follow CO-OP on Twitter at:http://twitter.com/COOPFS and keep up with industry issues via the CO-OP Insight Vault blog at:http://co-opinsightvault.com.