By Sarah Snell Cooke, Principal, Cooke Consulting Solutions

Credit unions operating in low-income and underserved communities must learn both the art and science of engaging and empowering the most vulnerable consumers. You must infiltrate and reconnoiter while also proving the humanness of a federally regulated financial institution. It’s a tricky balance not everyone can pull off, but credit unions can and should.

SCE FCU operates a couple of branches in the socio-economically challenged neighborhood of Boyle Heights in Los Angeles. After merging in a small credit union, the $680 million credit union has worked diligently to assure members it’s very much a part of the community, according to Chief Lending Officer Kitty Hunter. “People pay people, not walls,” she advised.

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SCE FCU has formed close relationships with several community-based organizations to help build its credibility among their lower-income members and maintain a better understanding of the residents’ needs. “Boyle Heights is a very, very low-income area. There are lots of check cashers and payday lenders. Banks were moving out. There were no financial institutions in the area when we were moving in,” Hunter explained. SCE now offers credit builder programs and share-secured credit cards, and has partnered with BALANCE on bill consolidation.

Consider this story: One SCE branch employee explained that one of his former bank customers from a previous job referred a friend to him at SCE. The member was embarrassed and had low hopes of repairing his financial standing. His FICO was barely 600 with charge offs, collections and a foreclosure due to losing his wife years prior. The employee started the member out with a secured Visa card and strong guidance. The member stuck to the plan, and a year later earned an unsecured card. After several months, the member’s credit score was in the high 600s with all charge offs and collections cleared.

The branch employee continued, “He now has his Harley he always wanted, paid as agreed for a year with us and plans on purchasing a home in the near future. He always thanks me for, “guiding him like no one ever has, and every time he comes into the branch, it never fails that he comes over and greets me with a great big smile and a strong hug.”

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These experiences motivate credit union employees to work even harder. Employees are encouraged to “share something vulnerable so they see we’re people too, and that helps them to share with us,” Hunter observed. Then members are more likely to repeat business and send referrals.

Another branch employee took care of a member with no credit history. The woman had 25 years of work history, but only took a job with documented income six months prior. The member had been granted permanent residency and was looking for a car, because she was working nights and needed reliable transportation. Concerned an older car she could afford without a loan would lead to huge repair bills, the credit union worked to approve her for $10,000 car loan with a rate of 9.99% under SCE’s First-Time Buyer Program with a manageable monthly payment of $207.26. She has since referred her family members to open accounts with us, and her daughter took advantage of SCE’s Credit Builder loan to rebuild her credit, and since has financed her first car her at the credit union.

Employees are encouraged to “share something vulnerable so they see we’re people too, and that helps them to share with us.” – Kitty Hunter

Credit unions don’t just get the feel goods from doing this type of work; they get more business from this type of work, too. SCE helped rehabilitate the FICO scores of 2,110 members, who started out below 620, and nearly 5,000 members whose credit scores were originally between 620 and 679. These members represent more than $42M in loans!

Additionally, SCE’s HUD data show that as of June 30, the credit union funded 2,760 loans to low-income borrowers, representing 47% of total applications SCE funded this year. About 30% of the credit union’s loan portfolio is in $126M dollars in loans to low-income borrowers.

These programs are loss leaders, Hunter acknowledged, but they’re counterbalanced through diversification in membership. Over the longer term, everyone benefits as lower-credit tier members improve their scores, they pay less for credit across the board and boosting their overall financial standing and that of the community, one member at a time.