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Hispanic Initiative – Greater Iowa Credit Union

Credit Union :Greater Iowa
Assets :$243,000,000
Address :801 Lincoln Way | Ames, IA 50309

Details :

Key Credit Union Data:

  • Loan/share ratio: 85%
  • Members: 28,800
  • Avg. shares/member: $6,595
  • Number of ITIN accounts:10

Background:

Greater Iowa CU inherited through mergers in 2003, two branches that are located in areas with a high Latino population. Its East Des Moines branch is located in an urban neighborhood and serves a very diverse population that includes Asians and Hispanics. About 20% of the members using that branch are Latinos, according to Michael Adams, vice president of marketing. The CU’s most western branch located in rural Denison, Iowa, has a membership composition of 50% Latinos. The biggest employer in Denison, a community of 8,000, is Farmland Foods and its meat packing plant operation. A majority of the employees at Farmland are Hispanics and based on his research of the community, Adams suggests that a significant number of these employees are undocumented.

That created some challenges for the credit union which states as one of its core philosophies that each branch is to “look out for members’ interests and provide a unique level of service not generally available at other financial institutions.” As Adams explains, “the credit union wants to be the financial institution of trust in each community it serves.”

The issue of undocumented workers has surfaced on several occasions at the credit union. For example, while submitting a loan application, a member attempted to use fraudulent documentation to apply for the loan. When a credit report was pulled, it became apparent that the member was using someone else’s identity. When asked about it, the member volunteered that the bill wasn’t his, nor was he the person named in the credit report. The credit union was forced into the uncomfortable position of filing a suspicious activity report on the member.

In Denison, city administrators have estimated that 80% of the community’s new population growth is likely to be undocumented workers. The credit union has struggled with how to resolve the issue of undocumented workers and still meet the financial needs of the community and maintain a reputation of trust.

Today:

The credit union decided to change its member identity and service policy. It began accepting the Matricula consular card as an acceptable form of identification and also began accepting Individual Tax Identification Numbers (ITINs) in lieu of SSNs to apply for loans. It implemented a credit builder loan called Préstano Camino el Credito or Path to Credit Loan. Members with no or little credit are encouraged to apply for the loan using a valid ITIN or a valid SSN. The credit union accepts the member’s statement of income and does not verify income or employment, which would require the person’s SSN. “The goal of the stated income program,” says Adams, “is to encourage members to obtain valid ITINs that can be used for loan purposes and not put the credit union or community in jeopardy.” The program was started with a soft launch at the Denison branch and will go credit union wide in February 2010, according to Adams.

There are two stages to the loan program. Initially, members can borrow up to $500 with seven months to repay at C paper rates – about 14% APR, says Adams. With a good repayment record, the member can then borrow up to $1,000 and is given 13 months to repay. Borrowers are given financial education and counseling support by staff, to ensure they understand the importance of on-time payments. Members are able to build credit through the program and if they successfully repay as agreed, members are then eligible for a full range of consumer loans offered by Greater Iowa. To date, there have not been any problems with the limited number of credit builder loans, but the program is still in its infancy, explains Adams.

Word of the loan program is spreading around the community and it is growing incrementally. “Word-of-mouth is very effective,” notes Adams, and the credit union also works through the Hispanic Outreach Task Force in Denison to reach the targeted market.

The credit union offers the IRnet VIGO remittance program and sees a lot of activity in the two branches. Each does 30 or 40 remittances a month. The East Des Moines branch is twice as large as the Denison branch, says Adams, “but there are many money transfer sites near the Des Moines branch.”

“Our Hispanic outreach program started in earnest about 1 ½ years ago,” says Adams. “We expect to see substantial movement and gains from our work two or three years down the road.”

Services Offered:

  • Check cashing and the CU recently implemented a “compensating funds fee” of $5 if the member is cashing a check without a similar compensating balance in savings
  • Free checking and electronic checking
  • Money orders
  • Stated income cash loans
  • ITIN loans
  • Alternative forms of identification including the Matricula Consular card
  • International Remittances
  • Financial counseling through Balance, with bi-lingual counselors
  • Special share CDs that allow for one withdrawal without penalty during the term of the CD

Marketing Strategies:

  • Word-of-mouth
  • Partnership with the Hispanic Outreach Task Force in Denison
  • Participation in Latino festivals
  • A Spanish video describing how to use banking services in America and Iowa was developed under a partnership with a local church, where Greater Iowa CU wrote the script and helped with filming and the church distributed the video to community organizations
  • Spanish language radio ads in the Des Moines area
  • Spanish language print ads in both Des Moines and Denison communities
  • Branch signage and collateral featured at branches
  • Development of Latino Advisory Councils in both communities
  • Targeted outreach to Latino opinion leaders in both communities

Measures of Success:

  • Overall membership growth for 2009 has averaged over 5% when credit unions nationwide are experiencing slightly over 1% growth
  • Currently, Latino membership at both branches is averaging 5% growth over the previous year
  • A Fiesta de Navidad (Christmas festival) at the East Des Moines branch attracted 300 Latinos

Additional Information:

“Changing our member identity and service policy,” says Adams, “was not a simple undertaking. The board vigorously debated the decision, expressing concerns that the credit union could damage its reputation.” The credit union used sensitivity and cultural awareness training to help staff feel comfortable with their roles. Another helpful tool for Adams was a book by Pulitzer Prize winner, Dale Maharidge, entitled, “Denison, Iowa: Searching for the Soul of America through the Secrets of a Midwest Town.” The book describes the evolutionary clashes that emerge as a largely all-white German-Lutheran population gives way to a sizeable Latino population. Denison represents small middle-America towns as they struggles to create a future for themselves as industry and farming decline and populations dwindle. “Denison is like a social laboratory,” explains Adams. “And the credit union is trying to appeal to a community that is 40% Latino and 60% Anglo and be viewed as a partner of trust to both populations.”

Adams attributes the credit union’s sincere outreach efforts to its Latino markets to the following factors:

  • Greater Iowa’s CEO, Shazia Manus, is a native of Bangladesh. Now an American citizen, she empathizes with the immigrant population and their struggles.
  • The credit union’s strategic plan includes a social mission to reach and serve the unbanked. The two branches which Greater Iowa inherited through mergers include many unbanked and under-served Latinos.
  • The credit union received a World Council of Credit Unions (WOCCU) grant that enabled them to expand their international remittance program through VIGO that prompted more aggressive outreach activities. Exposure to Coopera Consulting, a Hispanic research and advisory group, formed by the Iowa Credit Union League in 2006, which provided ready access to ideas and advice about how to serve the Latino market. For 2010, Adams sees even more aggressive programs to help its Latino markets. The credit union has formed Hispanic Advisory Councils in each community to help ensure it is meeting the financial needs of Latinos with the right products and services. Financial education remains a high priority and a Spanish-speaking counselor will help toward that end. “We try to be entrepreneurial in our efforts to get the word out about Greater Iowa CU,” concludes Adams. “We position ourselves as advocates to our members and our communities.”