ASI FCU's Newest Weapon Against Payday Lenders: A POS Payroll Cards for its Low-Income

NEW ORLEANS – ASI Federal Credit Union likes to consider itself a trailblazer when it comes to serving low- income members, and now the $185 million CU is charting new ground with a payroll card being rolled out this month. The ATM/debit-based card is being pilot tested with a 20-employee roofing contractor-which ASI declined to identify-and later on perhaps this month with the 700-employee St. Tammany Parish Hospital of New Orleans. The pin-based cards, which ASI developed on its own bypassing major payroll card vendors, will be acceptable at ATMs as well as at groceries, drug stores and other retail outlets. “We saw no reason we could not do this on our own,” explained Audrey Cerise, president/CEO adding the “need is there, particularly when you consider the problem of payday lenders.” ASI, which has its headquarters in Harahan, a New Orleans suburb and has a membership of 80,000, detailed plans for its proprietary payroll card at the annual Directors Conference of the Credit Union Executives Society meeting here. “Developing products and services to meet the needs of the `unbanked’ is nothing new for us,” declared Vera R. Mestayer, the CU’s vice president of member services, discussing the ASI program during a breakout session at the CUES meeting. The payroll card, which ASI hopes eventually will be available to any employee of an ASI SEG that does not have a relationship with a financial institution, represents another phase in the CU’s approach to confronting payday lenders, said Mestayer.. Payday firms in the New Orleans market “hate us,” she said, because of steps taken over the years to make ASI less accommodating to phone requests by the firms and because of the CU’s own competitive, low-fee loan package called “Stretch Plan.” Under “Stretch Plan” which has a $3 a week fee, ASI offers a $200 line of credit and requires a $101 payment on the first payday following the advance. Another $101 is due on the second payday. The payments cover principal and interest so the loan is paid in full after two paydays and so the ultimate goal is reached of tiding members over until payday, explained Mestayer, noting the $3 membership fee is deducted from the member’s savings account. But the Stretch Plan provides an array of benefits including free money orders and a free one party traveler’s check. In addition, members can increase their loan line to $500 if payments are made on time. They also can advance to two higher level plans: “Asset Builder” and Credit Enhancement – both offering longer repayment schedules and higher limits. Since ASI introduced its loan plans, growth has climbed to 5,600 participating members with loans in Stretch reaching $2 million with average loan balance of $350. Asset Builder has 225 members with $350,000 in outstandings and Credit Enhancement Plan (CEP) has 1,900 members with $2.75 million in loans. Regarding the introduction of the payroll card, Mestayer said many of ASI’s 500 SEGs would like to switch their payroll systems to direct deposit, but the “unbanked” problem prevents SEGS from doing so. The unbanked, she said, are faced with a variety of problems “from having to pay a check cashing fee each time they cash a check to having to hide money” and risk carrying large sums of cash wherever they go. Hence, ASI hit on the idea of creating the payroll card. Under its plan, said Mestayer, SEG employees “do not have to be members of ASI to obtain the card and there is no credit check run.” Upon receiving an ASI Payroll card, the employees’ pay is directly deposited to the plastic which can be used at any ATM to withdraw cash as well at POS terminals that allow PIN-based transactions. “In this way, employers can still simplify the company payroll system by requiring direct deposit and no employee will be overlooked,” said Mestayer. Mestayer noted that employees of both the roofing firm and the hospital have been “surprised to learn that they were eligible for membership in ASI.” It was also determined, she said, that all former unbanked employees could be approved for traditional savings or checking accounts at ASI, something they have “opted to open rather than remain unbanked.” Members or nonmembers are eligible for the payroll card but “whenever possible, unbanked members are encouraged to forge a banking relationship with ASI,” noted an ASI statement. The issuance of the cards to the roofing firm and the hospital will also coincide with ASI going to ACH origination making the product introduction timely and practical, noted Mestayer. Cerise said ASI is “pretty excited” about its payroll card but it is not the first financial institution in New Orleans to debut such an instrument. Hibernia Bank of New Orleans, for example, recently began debuting a payroll card, “and we decided that we may as well keep up to the competition,” said Cerise. In her presentation, Mestayer noted ASI’s long history of thwarting what it saw as injurious practices of payday lenders. For instance, ASI demanded payday firms stop calling the CU on account references to determine account balances, insisting they must requests only by electronic means. The payday calls were “clogging up the phone lines” and taking up teller time, she said. Detailing the history of ASI and its 1996 switch from a single sponsor to a low-income community development institution, Mestayer discussed the CU’s participation in an array of programs which reach out to first time homeowners and businesses. They have included ASI’s participation in SBA loans, IRS and VISTA programs as well as Habitat for Humanity grants through the National Federation of Community Development Credit Unions of which ASI is a member. In her CUES remarks, Vestayer noted the paradox of ASI’s role in NFCDCU as one of its very largest members and the internal problems associated with refocusing as an institution to serve the poor under NCUA capital guidelines. “We simply did not fit the mold as a typical NFCDCU credit union,” she recalled, and for a time “it was uncomfortable for the board and the staff” to trumpet its new role as an institution which serves the poor. But those problems were overcome when the management realized that “we can’t just serve the underserved” and thus the CU has to be structured to reach out to other segments to remain profitable. “We have to serve everyone,” she said and reach out. The membership has worked out excellently, she said. -