VACAVILLE, Calif. (11/20/13)--Representatives from Travis CU, Vacaville, Calif., recently testified before a California Senate banking committee about a new loan product geared towards helping the unbanked and underbanked Latino community.
| Travis CU Director of Corporate Communications Sherry Cordonnier, front, and Senior Vice President and Chief Loan Officer Stacy Fifield testify before the Senate Committee on Banking and Financial Institutions, which held an informational hearing on Thursday, Nov. 14, on various nonprofit and community based organizations with small dollar loan products. (Photo provided by California and Nevada Credit Union Leagues)|
Travis CU's Director of Corporate Communications Sherry Cordonnier and Senior Vice President and Chief Loan Officer Stacy Fifield were invited to testify before the Senate Committee on Banking and Financial Institutions, which held an informational hearing on Thursday on nonprofit and community based organizations with small dollar loan products.
Travis recently finalized a small dollar lending pilot program, the New Era Tanda Loan Program. The pilot program debuted in mid-2012, in part through a grant received by the National Credit Union Foundation. It was designed in partnership with Coopera, a firm focused on the emerging Hispanic market, to help Latino participants develop a 12-month shared savings goal and to take advantage of the credit union's unique savings and loan offerings.
"We developed the program concept for this unique program centered on tandas (also known as cundinas, sans or quinelas)," Cordonnier said. "Tandas--informal borrowing/lending circles--are common in immigrant cultures, especially Latin American immigrant cultures. The modernized tanda, developed by TCU, aimed at bridging a cultural custom with the credit union experience. TCU partnered with the Yolo Family Resource Center to conduct the pilot program. The program used a grassroots and culturally relevant approach tailored to the local Latino community."
The initial class consisted of six people, each of whom was encouraged to attend monthly financial literacy courses, all offered in Spanish. Participants contributed on a monthly basis to a shared savings account and also received a group share-secured loan to help save for a down-payment on a vehicle. After completing the program, each qualified participant was eligible for a TCU credit-building credit card and/or auto loan.
One of the goals of the program was to build Hispanic members' credit and good financial habits through financial education, Cordonnier said.
Travis CU found, via pre- and post-surveys, tjat those who participated were more likely to use online banking, bill pay, checking accounts, ATM/ debit cards, credit cards, savings accounts and direct deposit than they were prior to the program. They were also more likely to balance a checkbook, cash checks, and use a personal budget, Cordonnier said.
The Credit Union National Association and credit unions are committed to providing safe and affordable alternatives to predatory payday lenders. Loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%, although there is some flexibility under the National Credit Union Administration's short-term, small amount loan program. That program permits federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. For now, this amounts to an interest rate ceiling of 28%. Most credit unions offering payday loan alternatives also limit fees, provide member financial counseling, and encourage members to open savings accounts.