I was heartened recently to see past and present members of the National Credit Union Administration board express their concerns surrounding the need to charter new credit unions. It was especially encouraging to see them link the issue to considerations of diversity, equity and inclusion. For nearly 30 years, I helped organize CDCUs, community development credit unions that serve low-income and minority communities. With my colleague, Linda Levy, former CEO of the Lower East Side People’s Federal Credit Union in New York City, we wroteOrganizing Credit Unions: A Manual. But often, we had to advise community groupsagainstpursuing a credit union — even though credit unions are a compelling answer for communities long disempowered by the mainstream banking system. Why?
First of all, as any credit union manager can tell you, it’s tough to operate a highly regulated business. A credit union’s day-to-day operations are generally far more demanding than a nonprofit’s. Moreover, chartering a credit union is a lengthy, demanding process, typically taking at least two or three years, but often five years or more. You can start a nonprofit far more easily. Then there is the crucial issue of access to capital. As NCUA has noted, obtaining capital is perhaps the greatest challenge for a prospective credit union.
Here, unfortunately, is where non-regulated institutions have a major advantage. I cofounded the CDFI Coalition with the hope that the CDFI Fund would be the solution, providing capital for wealth-deprived low-income and minority credit unions. But for more than 20 years, as I detailed in my book, Democratizing Finance, 80 cents of every CDFI Fund grant dollar went to non-depository loan funds.
But this year promises to be a game-changer. The recent COVID-19 federal appropriations provide $12 billion for Minority Depository Institutions and CDFIs — of which $9 billion is specifically for banks and credit unions. Potentially, that could make a huge difference forexistingcredit unions, but not necessarily for prospective Black credit unions and other minority start-ups.
The problem is a catch-22 in CDFI Fund regulations, which effectively prevent the fund from committing an investment to a chartering group before the credit union is legally constituted. If this obstacle is removed — for example, if the CDFI Fund could pledge $1 million to a prospective credit union (subject to a charter being granted) — it would be far easier for a community group to raise additional capital and to galvanize community support. Chartering a credit union within one to two years could become a reality.
Removing the obstacle through a regulatory change would be the quickest way, but it may be necessary to pursue a technical change in the CDFI Fund and/or statutory language from the Treasury Department. This should be followed by the Treasury and the CDFI Fund dedicating a small portion of new and future CDFI funding to start-up credit unions and banks serving Blacks and other minority communities.
I don’t pretend that this path is easy. But the potential benefit — a new generation of credit unions that can advance diversity, equity, and inclusion — is well worth it.
When the government shutdown hit in October and paychecks stopped, thousands of federal employees were left wondering how to make ends meet. Credit unions across the country stepped up—but Keesler Federal Credit Union went above and beyond. No loans, no hassle—just your paycheck Instead of making members apply for emergency loans, Keesler Federal launched its Paycheck Relief Program. Revolutionary in its simplicity, it worked like this: if you were a federal employee with direct deposit at Keesler Federal, your paycheck kept coming—interest-free, fee-free, and stress-free. Each qualified member could receive up to $6,000 per pay period for as long as 90 days. No hoops, no headaches. From October 1 until the shutdown ended, Keesler Federal advanced more than 5,000 paychecks totaling $6.5 million to 1,710 members. For non-members, they even offered zero-interest loans up to $6,500 with a year to pay it back. This proactive approach meant that before the first missed paycheck, Keesler Fed...
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