Community Service

Forward-Thinking Lending Approach Invigorates California CU

Policies that favor job status over credit history attract more Hispanic members.

March 21, 2013
KEYWORDS credit , ficu , hispanic , lending , loans
/ PRINT / ShareShare / Text Size +
iStockphoto/Thinkstock®

With 80% of its members identifying themselves as Hispanic, $72 million asset First Imperial Credit Union of El Centro, Calif., knows the importance of catering its products and services to serve the specific needs of this influential community.

Headquartered near the U.S.-Mexico border, El Centro is situated in the Imperial Valley, one of southern California’s larger agricultural communities, attracting field workers and laborers from Mexico. Because of the seasonal nature of Imperial Valley work, the region suffers a 28% unemployment rate and a history of financial instability.

As such, financial institutions tied to the long-standing practice of lending money based solely on credit scores have had trouble realizing the growth potential and revenue opportunities that can come from properly serving the Hispanic market.

When President/CEO Fidel Gonzalez joined First Imperial in 2009, he understood that to successfully serve the local Hispanic population, the credit union would need to change its lending philosophy.

“Most Hispanics are in need of financial services, and they are frequently turned away from other financial institutions because of their credit scores and employment history,” Gonzalez says. “They need financial institutions that are willing to take a chance on them. So, we adopted a new lending structure allowing our credit union to place more emphasis on a member’s ability to pay moving forward, rather than on past delinquency.”

To do this, Gonzalez worked closely with his staff and industry colleagues. First, the team altered the credit union’s practice of using a member’s credit score as an approval mechanism.

Rather, Gonzalez encouraged his team to focus on the member’s employment status, working to approve loans for members with 12 months of work history and who were current on their loan payments. The staff also reviewed an applicant member’s credit history to better understand other financial obligations and the types of loan that applicant members could afford.

Under the new lending structure, a member’s credit score became a pricing tool in the loan application process rather than a deciding factor.

First Imperial works with members to book a series of small loans, starting with $500 and working up to larger loans as credit improves.

“We want members to be successful," Gonzalez says. "So together we set realistic goals, loaning to them based on what they can afford. We impose credit limits to offset the risk, and we educate our loan recipients on the importance of paying—if they pay us, we’ll lend to them again. That’s a powerful motivator for our Hispanic members.”

To supplement its loan-builder program, Gonzalez also instituted the Opportunity Checking program. This is designed for any member who has been denied a checking account in the past because of account mismanagement or a Chex Systems record.

The goal of the program is to re-establish members into normal financial services and encourage them to stop using check-cashing establishments that charge high fees for access to cash.

Members open an Opportunity Checking account for $50 and are charged a $10 monthly maintenance fee to receive many of the advantages of a traditional checking account, including an ATM or debit card. The cards carry lower limits, but there is no minimum balance required and the accounts offer free home banking and bill pay.

After 12 months, the Opportunity Checking account converts to a regular checking account that includes overdraft privilege, regular ATM/point of service limits, and other perks.

“The feedback from our members has been extremely positive,” Gonzalez says. “Because many of our members get paid weekly, the monthly fee is small compared to the 3% to 5% [that] check-cashing establishments typically charge.

"This program is a win-win," he continues. "Hispanics are gaining access to the financial services they desperately need at prices they can afford and with terms they can meet. And the credit union is able to capture lending activity that would have been lost had we not created a relationship.”

In the 18 months since Gonzalez and his team implemented these new programs, First Imperial opened 330 Opportunity Checking accounts and realized nearly $40,000 in fee income.

The credit union also booked more than $1 million in loans and increased total net membership by 1,958, a 17% increase in a year and a half.

For First Imperial, Gonzalez says “Making a Difference, One Member at a Time” isn’t just a clever marketing slogan. Rather, it’s a true reflection of the credit union’s commitment to innovation—stepping up to provide fair, dignified, and affordable services to a deserving group of influential members.

This case study is part of the California and Nevada Credit Union Leagues’ Applied Research Institute Hispanic Opportunity Report, developed in partnership with Coopera.

Post a comment to this story

heroes

What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive