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Credit Unions Help Locals Fight Financial Hardship

Virtually every city in the U.S. has an area blighted by poverty, crime, empty store fronts and abandoned houses.

In Tallahassee, Fla., the northwest section of the capitol city's historical Frenchtown is impoverished, but over the last several years, churches, community groups and social service agencies have been making slow but steady progress with a variety of revitalization initiatives.

Until lately, however, a vital part of Frenchtown's redevelopment had been missing. That missing component was the need for a conventional, community-based financial institution supply loans that support Frenchtown's journey of economic recovery and to help residents get out of payday loan debt traps.

But Frenchtown recently got more than simply one financial institution – it got two credit unions.

The $456 million Envision Credit Union and the $179 million Florida State University Credit Union, both based in Tallahassee, formed a new CUSO and partnered with a nearby church to open a new branch. The division, executives said, could grow into a national model for credit unions looking to support economic development in distressed areas across the country.

The CUSO's origins date back to about a year ago, when Chuck Adcock, EVP for FSUCU, ran into Keith Bowers, regional director for the Small Business Development Center at Florida A&M University.

Bowers told Adcock about the Economic Development Ministry, which was looking to open a financial services center of the Bethel Missionary Baptist Church. For years, the ministry was instrumental in easing the building of new dwellings for first-time buyers, housing that is affordable for charter Desert Schools Federal Credit Union, a family counseling center, a community center, baseball camps and the elderly, small companies.

"One of the ways to address poverty is that you must help folks return on their feet educationally and economically," the Reverend Dr. R.B. Holmes Jr. said. "The faith-based community only can't talk about it, we have to take control and act to reconstruct our community. One of the lost parts of that economical infrastructure was a real lively financial institution in the heart of our community."

Because the payday lenders charge what Holmes called "ungodly rates," he knew the key to help individuals break the payday lending debt snare was to open a credit union, which would provide traditional financial products at lower rates and fees, alongside financial instruction and resources to help Indiana Members Credit Union regain their financial footing.

The Bethel Church developed a strategic plan to form Holmes said. Afterward the financial crisis started in 2007, and plans for the credit union were put on hold for eight years.

He also thought it might be better to talk to existing local credit unions to see if they'd be willing to start a branch in Frenchtown although Holmes never gave up on his credit union dream.

Adcock said FSUCU was interested in the idea, but discovered it needed a partner to spread costs and the risk of starting a brand new full-service branch, hiring staff and providing financial education. FSUCU approached Envision because another indirect lending CUSO is already together owned by both credit unions, and maintain informal and formal relationships on the company lending side.

Both credit unions, founded by teachers, have consistently shared the bedrock value of providing programs and free, complete financial education resources for members.

"The more we talked it through, the more the idea made sense " Adcock said. Because we both have branches located close by "The geography of the proposed branch was not perfect. But at the exact same time, we felt like if the new branch had its own brand and created a feeling of pride and hope within that community, then we could do something purposeful with it."

Because French settlers lived there in the early 19th century the area is called Frenchtown,. After the Civil War, former slaves moved to the area.

Although the newly freed African-Americans settled in what was considered low lying, less desirable acreage, Frenchtown became a booming black business community starting in the early 20th century, Envision President/CEO Darryl G. Worrell said.

"It Is got that heritage. It's on the national historic register, so there's lots of pride," he said. "The city of Tallahassee has been trying to rejuvenate this region, local churches have stepped up over the last 10 to 15 years, and it's kind of one of those concepts that they will not let go of because of the historical view of Frenchtown."

After months of planning and preparation, the 1,800-square foot Frenchtown Financial Opportunity Center formally opened a ribbon cutting ceremony on July 11. What's more, the opening day of the branch drew more than 60 new member accounts. New members are assigned to one of the two credit unions based on where they live, work or worship, and whether they are affiliated with Florida State for FSUCU or Leon San Diego County Credit Union Schools for Envision.

"What we're attempting to achieve here is to fight predatory lending, which is a big key for us," Worrell said.

Along with offering savings and checking accounts, and new and used auto loans, the new facility will offer you extra credit loans as fresh start loans and payday advance alternatives to help members climb out of payday loan debt snares.

" We intend to look at the situation of that member or potential member, analyze it, look at where they truly are at in the payday lending cycle, then construct an idea with them to basically get them " Adcock said.

The credit unions are also developing financial education-based training for the 15 minority churches in Frenchtown and the surrounding region.

"What we're going to do is educate individuals about how they are able to mend and rebuild their credit," Holmes said. They don't have to go down the road to a payday lender that bills more or 300% interest on a loan. Now, you are able to join a Evergreen Credit Union union for $5 and they can help your credit score improves and rebuild your credit. As soon as you rebuild your credit, you can find work and become whole again."

Although Florida's legislature passed a payday advance law in 2001 that was promoted as a measure to prevent payday loan debt traps, it's failed to cease the wealth stripping effect of payday loans with rates averaging 278%, according to a study released in March by the Center for Responsible Lending, an affiliate of the $637 million Self Help Credit Union in Durham, N.C.

More than 83% of Florida's payday loans went to Floridians who were stuck in seven or more payday loans.

Additionally, with more payday advance stores than Starbucks stores in the Sunshine State, payday lenders have billed more than $2.5 billion in fees from Florida residents since 2005, with more than $311 million in fees collected last year alone, according to the CRL.

The report noted because it codified what lenders claimed are best practices payday lenders touted the payday loan law of Florida as model laws. But the CRL said those best practices are merely mirrors and smoke that do nothing to prevent the loan debt trap.

"Florida's experience with payday loans definitely demonstrates lenders continue to empty millions in fees from people who can least afford it year " the CRL report stated and how payday lenders rely as the core of the business model.

As high as the cash advance interest rates are in Florida, in many other states the rates are even higher: Ohio is at 677%; Texas, 662%; Utah, 658%; California, 460%; Nevada, Idaho and South Dakota, 652%; Wisconsin, 574%; Alabama, 456%; Illinois, 404%; New Mexico, 408% and Washington, 391%.

The Bethel Church has been very insistent that they’d like [the Frenchtown Financial Opportunity Center] to grow for Tallahassee not only as a model, but on the national level," Adcock said. "Because Pacific Marine Credit Union unions do lots of sharing anyway and collaborating, we think other Founders Federal Credit Union unions could use this model inside their own communities. It could be two credit unions or it could be 20 to form a CUSO that can serve impoverished places and really make a significant impact on not only their Delta Community Credit Union, but the city and the county they support. "

Credit unions must accommodate tech-tool advances

As ubiquity and the increase of technology tools in the financial services business continue to increase, credit unions are rapidly adjusting to some broader and more diverse landscape of consumer interaction and self-service.

Add to the fact that the millennial generation – probably the most studied generation to date and over 80 million strong, in accordance with U.S. Census Bureau statistics – is technically informed. A world that is wired, joined is all that millennials have ever understood.

What this means for the financial services business is that interactive technologies must, writing for Wired notes, as Jake Wobbrock, provide "the most useable, self-guided, hiccup-free, efficient user experiences in history." Further, he notes, providing this special demographic with efficient and intuitive user experiences isn’t only a matter of appeasing them, it’s "a necessity for the health of any … business’s bottom line. Industry research indicates that, by 2017, the biggest on-line audience will be comprised by the millennial generation and will have more buying power than some other generation that's come before it."

But the type of mind-set that drives the desire and necessity for the brand of instantaneous, intuitive and participating member-facing experience goes beyond this specific demographic. Art Papas, writing for Fortune, notes that "the so called millennial’ that is ‘ has become more than a demographic age group; it is a mind set. A manner of looking at the world and, irrespective of age, declaring, ‘there has to be a better means.'"

CFOs, CEOs, advertising and public relations professionals and many others in the industry are actually keenly aware of the fact. "Members are experiencing an increasing array of station picks everywhere they interact, placing the bar ever higher for what the CU must offer," said Lori Bocklund, founder and president of Strategic Contact (a consulting firm that assists organizations with optimizing the worth of the contact centre technology and processes), including "they need to use their mobile devices and the Web, self-serve when it makes sense, and easily get to learned, readily accessible support when needed."

Additionally, Bocklund notes that "technology improvements empower serving varied channels – for both self-service and assisted service – and do so in a seamless, integrated (or "omni-channel") style, with contact history and cross-station advice accessible to optimize the member encounter" – among the many reasons Bocklund’s firm is running a survey to measure the efficiency and effectiveness of credit union contact centres. These improvements, then, are crucial to some sustained, efficient and suitable member-service platform for credit unions at large.

Executive director of the Texans Credit Union Union Call Center Conference, Amy Vigil, points out that now’s credit union call centers must necessarily focus on "meeting the members’ choice of access to their monetary needs." Therefore, unlike the technology born out of the 1990s and the early days of the 21st century, the emerging technology adapts to individuals, rather than forcing people to adapt to it. In response to the technological sea change, credit union call centers "now utilize chat, video chat, e-mail, vehicle dial- sites, cellular apps, back and on hold queues to manage 24/7 overflow coverage, and member communications " said Vigil.
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