The $456 million Envision Credit Union and the $179 million Florida State University Credit Union, both based in Tallahassee, formed a new CUSO and partnered with a local church to open a new branch. The branch, executives said, could develop into a national model for credit unions looking to support economic development in distressed areas across the country.

The CUSO's origins date back to about a year ago, when Chuck Adcock, EVP for FSUCU, ran into Keith Bowers, regional director for the Small Business Development Center at Florida A&M University.

Bowers told Adcock about the Bethel Missionary Baptist Church's Economic Development Ministry, which was looking to open a financial services center. For years, the ministry was instrumental in facilitating the construction of new homes for first-time buyers, affordable housing for the elderly, small businesses, a family counseling center, a community center, baseball camps and charter schools.

“One of the ways to address poverty is that you have to help folks get back on their feet educationally and economically,” the Reverend Dr. R.B. Holmes Jr. said. “The faith-based community just can't talk about it, we have to take control and act to rebuild our community. One of the missing components of that economic infrastructure was a real vibrant financial institution in the heart of our community.”

Because the payday lenders charge what Holmes called “ungodly rates,” he knew the key to help people break the payday lending debt trap was to open a credit union, which would provide traditional financial products and services at lower rates and fees, along with financial education and resources to help members regain their financial footing.

In 2005, the Bethel Church developed a strategic plan to form Bethel Frenchtown Community Credit Union, which several banks supported, Holmes said. Then the financial crisis began in 2007, and plans for the credit union were put on hold for eight years.

Although Holmes never gave up on his credit union dream, he also thought it might be better to talk with existing local credit unions to see if they would be willing to open a branch in Frenchtown.

Adcock said FSUCU was interested in the idea, but determined it needed a partner to spread the risk and costs of opening a new full-service branch, hiring staff and providing financial education. FSUCU approached Envision because both credit unions already jointly own another indirect lending CUSO, and maintain formal and informal relationships on the business lending side.

Both credit unions, founded by educators, have always shared the bedrock value of providing free, comprehensive financial education resources and programs for members.

“The more we talked it through, the more the idea made sense to us,” Adcock said. “The geography of the proposed branch wasn't ideal because we both have branches located close by. But at the same time, we felt like if the new branch had its own brand and created a sense of hope and pride within that community, then we could do something meaningful with it.”

The area is called Frenchtown because French settlers lived there in the early 19th century. After the Civil War, former slaves moved to the area.

Although the newly freed African-Americans settled in what was considered low-lying, less desirable land, Frenchtown became a thriving black business community starting in the early 20th century, Envision President/CEO Darryl G. Worrell said.

“It's got that legacy. It's on the national historic register, so there is a lot of pride,” he said. “The city of Tallahassee has been trying to rejuvenate this area, local churches have stepped up over the last 10 to 15 years, and it's kind of one of those concepts that they won't let go of because of Frenchtown's historical perspective.”

After months of planning and preparation, the 1,800-square-foot Frenchtown Financial Opportunity Center officially opened with a ribbon cutting ceremony on July 11. What's more, the branch's opening day drew more than 60 new member accounts. New members are assigned to one of the two credit unions based on where they live, work or worship, and whether they are affiliated with Florida State for FSUCU or Leon County Schools for Envision.

“What we are trying to accomplish here is to fight predatory lending, and that is a big key for us,” Worrell said.

In addition to offering savings and checking accounts, and new and used auto loans, the new center will offer extra credit loans as payday loan alternatives and fresh start loans to help members climb out of payday loan debt traps.

“We plan to look at the situation of that member or potential member, analyze it, look at where they are at in the payday lending cycle, and then build a plan with them to basically get them out of that payday lending cycle,” Adcock said.

The credit unions are also developing financial education-based training for the 15 minority churches in Frenchtown and the surrounding area.

“What we are going to do is educate people about how they can fix and rebuild their credit,” Holmes said. “Now they don't have to go down the street to a payday lender that charges 300% or more interest on a loan. Now, you can join a credit union for $5 and they can help you improve your credit score and rebuild your credit. And once you rebuild your credit, you can find a job and become whole again.”

Although Florida's legislature passed a payday loan law in 2001 that was promoted as a measure to prevent payday loan debt traps, it has failed to stop the wealth stripping effect of payday loans with rates averaging 278%, according to a study released in March by the Center for Responsible Lending, an affiliate of the $637 million Self-Help Credit Union in Durham, N.C.

More than 83% of Florida's payday loans went to Floridians last year who were already stuck in seven or more payday loans.

Additionally, with more payday loan stores than Starbucks stores in the Sunshine State, payday lenders have charged more than $2.5 billion in fees from Florida residents since 2005, with more than $311 million in fees collected last year alone, according to the CRL.

The report noted payday lenders touted Florida's payday loan law as model legislation because it codified what lenders claimed are best practices. But the CRL said those best practices are merely smoke and mirrors that do nothing to prevent the loan debt trap.

“Florida's experience with payday loans clearly demonstrates how payday lenders rely on the cycle of debt as the core of their business model and lenders continue to drain millions in fees from those who can least afford it year after year,” the CRL report stated.

As high as the payday loan interest rates are in Florida, in many other states the rates are even higher: Ohio is at 677%; Texas, 662%; Utah, 658%; California, 460%; Nevada, Idaho and South Dakota, 652%; Wisconsin, 574%; Alabama, 456%; Illinois, 404%; New Mexico, 408% and Washington, 391%.

“The Bethel Church has been very adamant that they'd like [the Frenchtown Financial Opportunity Center] to grow as a model not just for Tallahassee, but on the national level,” Adcock said. “Because credit unions do a lot of collaborating and sharing anyway, we think other credit unions could use this model in their own communities. It could be two credit unions or it could be 20 to form a CUSO that can serve impoverished areas and really make a meaningful impact on not just their community, but the city and the county they support.”