Give Credit Unions the Credit They Deserve

By Rita Haynes in the Dallas Morning News, June 14, 2008

The personal debt crisis looms heavy over our nation. Last week, Ohio Gov. Ted Strickland signed legislation to severely limit the predatory practices of payday lenders — whose annual interest rates can reach 400 percent and cripple those who are least able to bear the consequences of debt.

Meanwhile, payday lenders complain that folks will have nowhere else to go get money when they can’t make ends meet.

While traditional banks do not often give the poor access to their services, there is a solution. In 1958, I helped rescue the Mount Sinai Baptist Church Credit Union, and I have served as CEO of the Faith Community United Credit Union since 1991, when we changed our name and focus. We are a coalition member of the Community Development Financial Institutions and have more than $10 million in assets. We offer saving and investment opportunities, financial counseling, loans, mortgages and other opportunities to 6,000 members, largely low-income families in greater Cleveland.

While payday lenders are geared to take advantage of the poor, credit unions — with investment pools of money formed by members themselves — are geared to help the working class or low-income families establish good credit, save, spend responsibly and realize their dreams of home ownership, education or starting a business.

Credit unions with CDFI status like ours can also receive contributed funds from banks and foundations to help with this mission. We counsel folks to take loans that are appropriate for their circumstances and in this way protect their members from crushing debt and encourage a habit of savings.

The payday lenders say credit unions cannot serve everyone. In order to remain stable, credit unions must be prudent; but we do take measured risks to help those in need. The credit union mission is “not for profit, not for charity, but for service.” We teach someone how to plan and save and become a good credit risk. We provide financial education and personalized advice. This is a sorely needed service to truly help the poor.

Our credit union has initiated a bold and unique program to give people an alternative to the dangers of payday lending. It is called the “Grace Loan” — a small, short-term loan that banks don’t normally provide. More credit unions are now seeing the need to provide this service, too. We require that the borrower save a portion of what they would have given to the payday lender in fees, thus teaching them good financial habits and helping build a credit history for their goals.

The credit union, as the healthy alternative to payday lending, deserves a fresh look and greater support as one key part of a new movement toward thrift and confronting the debt culture. It’s time to give credit unions the credit they deserve.

Rita L. Haynes is CEO of the Faith Community United Credit Union and was former chairwoman of the board of the National Federation of Community Development Credit Unions, whose annual conference ended on June 16th in Dallas. She was a contributing author for the new Institute for American Values’ report “For a New Thrift: Confronting the Debt Culture.” Her e-mail address is rhaynes@faithcu.com.