Don't wait for Congress. That's one of the key messages the Chicago-based Center for Financial Services Innovation told credit unions that may have been considering serving the 11 million undocumented immigrants in anticipation of Congress passing the long-awaited comprehensive immigration reform bill.
"They should act now by developing foundational products like credit-building loans and 'legalization and citizenship loans' as well as basic transactional, saving and credit services that put immigrants on the path towards long-term financial health," according to the report.
Credit union executives who are serving immigrants couldn't agree more.
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"Whether immigration reform moves forward or not, it is going to be an ongoing process to build the legitimacy and the financial capacity of the immigration population," Sherrod Halliburton, president/CEO of the $27 million Manatee Community Federal Credit Union, said. The Bradenton-Fla.-based cooperative began marketing to the immigrant population about four years ago.
"I can say we are very interested in the immigrant market not just from a business perspective, but you are talking about a growing immigrant population," Halliburton said. "You are talking about a population that shows extreme loyalty."
The 39-page CFSI research report, Investing in the American Dream, recommended strategies that can help financial institutions build long-term relationships with immigrants. The report also highlights how credit unions and banks have been reaching out to immigrant consumers.
Understanding the financial needs
Executives at the $340 million Freedom First Federal Credit Union recognized the immigrant population in their Roanoke, Va., community was big, and it is expected to grow bigger for years to come.
To gain a deeper understanding of the financial needs of immigrants, Freedom First said it partnered with local law firms and Catholic charities that work with them.
In August 2013, the credit union won a $100,000 NEXT Seed Capital Award from Opportunity Finance Networking to launch an American Dreamer loan product, which provides immigrants with the financing they need to apply for citizenship. Dave Prosser, vice president of community development at Freedom First, said the loan finances more than just government fees.
As part of the citizenship process, immigrants have to take a day off work to travel to West Virginia to get fingerprinted. Many have to hire someone to drive them. The open-ended American Dream loan helps immigrants offset these costs as well, he said.
"The citizenship process is more comprehensive than just the citizenship fee, so we look at the whole picture," Prosser said.
Alternatives for undocumented immigrants
While many financial institutions accept consular IDs, foreign passports and other forms of alternative identification to verify the identity of prospective members, some institutions have been unwilling to serve individuals without a Social Security number for fear of regulatory scrutiny, according to CFSI.
However, the center's report pointed out by refusing to accept other forms of ID, financial institutions are missing out on an opportunity to serve undocumented immigrants. Some local and regional nonprofit organizations offer ID cards that are accepted at local credit unions and banks to open accounts.
Additionally, when a prospective member doesn't have a Social Security ID, Manatee Community FCU said it will accept the individual taxpayer number.
Target products for immediate financial needs
The CFSI report highlighted the $550 million Self-Help Federal Credit Union as an example of providing immigrants with affordable short-term loans for both legal and undocumented immigrants.
The Durham, N.C.-based credit union helps immigrants establish credit by directing loan proceeds into a savings account and reporting borrowers' monthly payments to credit bureaus, according the CFSI. Like Freedom First, Self-Help also offers a citizenship loan.
If comprehensive immigration reform is passed, undocumented immigrants will need loans to finance expenses including application fees, legal fees, fines, back taxes and tuition for preparation classes, according to CFSI.
Products for short and long term finances
Not wanting to see business slip away to check cashers, Carver Federal Savings Bank in New York opened a suite of transactional products that included check cashing, bill payment, money transfer, money orders and reloadable prepaid cards, according to CFSI.
Since the program's inception in 2011, the bank has served more than 17,000 persons, including 7,000 that became new customers, CFSI said. Moreover, about 40% of all of these customers opened a checking or savings accounts that helped them build long-term financial growth and stability.
Distribute products through channels
The CFSI report recommended financial institutions partner with local retailers, civic organizations and other community-based groups to ensure that the banking products and services are offered in places where immigrants live, work, shop, and worship.
Non-bank financial service providers have been successful in serving immigrants largely because they offer services at grocery stores, bodegas and retail stores, according to CFSI.
Deliver high quality member service
For many credit unions, this goes without saying. However, when it comes to serving the immigrant population, the $150 million Latino Community Credit Union in Durham, N.C., discovered high quality services comes down to one word: respect.
"One of the most important things for immigrants is to be treated with respect," Luis Pastor, president/CEO of Latino Community, said. "When you are penalized for situations beyond your control or rejected from service, you get discouraged."
The principle of respect is reflected throughout all aspects of the credit union's approach to service, according to the CFSI report.
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