MARCH 26, 2003

"The Role of the Matricula Consular at Financial Institutions"

Chairman Rodriguez, Representative Gutierrez, and members of the Congressional Hispanic Caucus, thank you for the opportunity to provide comments on the role of the Matricula Consular at credit unions. I am John Herrera, Vice President of Self-Help Credit Union and founding member and current Board Chair of the Latino Community Credit Union, with offices in Durham, Charlotte and Raleigh North Carolina. I appear before you today on behalf of the Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU).

On behalf of the more than 10,300 state and federal credit unions and over 82 million member owners in the United States, I would like to provide you with the following comments. As you may know, credit unions are not-for-profit cooperatively owned financial institutions. Because credit unions are member-owned financial institutions with common bond membership requirements, we are intrinsically motivated to have a reasonable awareness of our membership.

I know of 56 credit unions in 17 states that currently accept the matricula consular ID card and expected that there are many others that I am not aware of that accept this form of ID. In addition, our national trade association, the Credit Union National Association, has recently taken a formal position to oppose any legislation prohibiting the use of the Matricula or other similar government-issued ID, and support legislation allowing its use for financial institutions or for general purposes.

First, one of the seven "International Operating Principals for Credit Unions" worldwide is the principal of non-discrimination. Credit unions throughout the world are committed to serving all individuals within their fields of membership regardless of sex, race, religion, income-level or citizenship status. My particular credit union, Latino Community Credit Union, received the single largest program grant from the Treasury Department's First Accounts program to serve the unbanked. Let me be clear, our interests are in reaching this community whether they are born in the United States, have documentation to reside in the United States, or do not have documentation. One of our proudest accomplishments is that we are now serving several hundred immigrants from Kenya. As you can see, service to all individuals is at the core of credit unions.

Those credit unions that are accepting the matricula as a valid form of identification are doing so based in part on the following:

- There is no statutory or regulatory prohibition.
- The due diligence performed on the IDs provides us with reasonable assurances to the authenticity of the document presented.
- Local boards of credit unions have made the decision to accept the IDs.

I will explain each one more fully.

No Legal Prohibitions
We have uncovered no federal statutory or regulatory prohibitions against accepting a matricula for identification purposes associated with member accounts. In addition, on July 23, 2002, the Treasury Department and federal financial institution regulators jointly published the proposed rule implementing Section 326 of the USA Patriot Act. This provision requires the regulators to implement rules detailing the minimum standards for identification of individuals that open accounts. We commend the Treasury Department's efforts to achieve a balanced approach in this proposed rule, even though we expressed our concern about specific provisions. Nonetheless, the proposed rule does not discourage acceptance of the matricula and provides a framework for local decisions based on what is reasonable for each financial institution. Please bear in mind, financial institutions are not required by law to accept drivers' licenses specifically for opening accounts. And we do not believe that we should be required to accept the matricula, passport or other form of ID, but rather each financial institution should be provided with the authority to determine what types of identification it will accept. We appreciate Treasury's willingness to consult with financial institutions in finalizing the rules for account opening procedures.

Due Diligence
Prior to broad acceptance of the matricula ID and CUNA's position on it, credit union officials at national and local levels performed sufficient due diligence. We met with local consulate generals, members of President Fox's cabinet, the Mexican Ambassador to the United States and President Fox to discuss and understand the document.

Following these discussions, there was a review of the seven security protection devices included in the enhanced matricula, including scrambled indita, Advantage Seal stamped photos, numbered telsin paper, and hologram logos. These security features ensure that the matricula is as secure a document as any U.S.-issued identification, enhancing the certainty that the member is who they say they are.

As you may know, the Salvadoran Embassy is considering pilot issuance of consulate IDs and credit unions officials have met with their Ambassador to the US to discuss these same type of issues prior to deciding to accept or reject the IDs for the purposes of authenticating identification to open an account by its citizens.

Local Decisions
We believe that boards of cooperatively and locally owned financial institutions have sufficient information to serve the diverse needs of their communities. A case in point is my home state of North Carolina. In the past decade, the Latino population of the state has grown more than 400 percent as immigrant workers helped expand businesses such as furniture plants and construction. In 1997, officials from Duke University Hospital contacted area Latino leaders, including myself, to try to identify why so many members of our community were ending up in the hospital.

We realized most of these newcomers were unbanked. Criminals were targeting Latinos for robberies and assaulting them as they left the check cashers on payday. For example, Federico Ñañez was gunned down in front of his apartment and robbed of his week's pay of $500. Francisco managed to escape death, but was left paralyzed in a wheelchair for the rest of his life. Federico and many others victims like him became members of the Latino Community Credit Union. With the support of regulators, local law enforcement officials, banks, other credit unions and the community, we launched the Latino Community Credit Union in June of 2000. Today we have over 12,000 members who have deposited over $4.4million with us - not just saving money, but saving lives. Ninety percent of our members are immigrants and the vast majority are low-income.

Two-thirds of our members have never had a financial account in their lives - neither here in the U.S. nor in their home countries - and are working long hours at multiple jobs to help support family members abroad. This is not unique to North Carolina. Nationwide, approximately 60 percent of all Latino immigrants do not have access to financial institution services, compared to 10 percent of the total U.S. population that is unbanked. We have decided to accept the Matricula, and while not required by law or regulation, we also required one additional form of ID with the presentation of the matricula to further authenticate the individual. This is a common practice by financial institutions.

Commitment to Stopping Terrorist Financing and Serving the Underserved
I believe that ensuring access to financial services for all immigrants and shutting down terrorists are not competing, but rather complimentary, objectives. It is clear that part of the reason so many immigrants remain unbanked is because the nation's financial institutions are unsure if, and how, they can provide service to documented and undocumented immigrants. The lack of certainty in the current regulatory environment results in many banks not welcoming immigrants. The immense majority of immigrants are here: to work, to prosper, and to live the American dream.

Credit unions and other financial institutions comply with the Office of Foreign Asset Control's (OFAC) requirements to check names of new members against its Specially Designated Names (SDN) and the block country list. We do this on a real-time basis for all our international money transfers - a popular service among our membership. Our government has identified the individuals on this SDN list as a potential threat to the US. We fully support shutting these people down and have dedicated the resources to do so, even though we are a very small institution with 25 employees and only $13 million in total assets.

We certainly appreciate the importance of meeting our compliance responsibilities, particularly after September 11 and given the current war. However, given these requirements we already face, it is imperative that policymakers do not develop rules that will result in unreasonable obstacles to serving our members.

Again, we want to work with Treasury and Congress to develop an approach to this issue that will not have a chilling effect on the ability of underserved individuals to use a traditional financial institution. Otherwise, we will undoubtedly lose them as they head back to the usurious practices of money transfer companies, check cashers, and payday lenders.

I would like to briefly call attention to the issue of money transfers, given their importance in immigrant communities and their attention within the PATRIOT Act. The practice of immigrants who send money back home to help their families is not new. For generations and across cultures, a primary motive for immigrants to come to the U.S.A. has been the belief that they could provide for themselves and their families a better life. Remittances to Latin American and Caribbean are now roughly equal to all foreign direct investment (FDI) to the region and remittances are expected to surpass FDI this year.

Since 1997, the World Council of Credit Unions (WOCCU) has been working with its members to facilitate remittance transfers among credit unions. In July 1999, the project became formalized and WOCCU's International Remittance Network (IRnet*) service was launched. IRnet has subsequently transferred millions of dollars for low-income immigrants in the U.S.A. to over 40 countries. There are currently 180 credit unions with 750 points of service in 29 states offering the service. Credit union national associations in El Salvador, Guatemala, Honduras and Jamaica are distributing remittances in these countries, thereby encouraging low-income individuals in developing countries to enter into the financial system and begin saving.

Our efforts in this area, however, could be significantly enhanced with a policy change. Credit unions, as you know, may only serve individuals who are their members. In an effort to greatly increase outreach to low-income and unbanked individuals such as those in the immigrant community, we propose that credit unions be permitted to provide check cashing and remittance services to non-members, such as those within the field of membership. This change would provide individuals with a low-cost, viable alternative to predatory senders and payday lenders. I am pleased that this provision, long championed by Rep. Gutierrez and others, is a part of H.R. 3175,the recently introduced "Regulatory Relief Act of 2003."

In conclusion, many credit unions throughout the country in addition to Latin Community Credit Union are leading the way in ensuring that immigrants have access to affordable financial services. We want to work with Congress and the Administration to ensure that matricula consular becomes an acceptable form of identification and that more immigrants are provided access to our country's mainstream financial institutions.

Thank you for this opportunity to comment and I will be glad to answer any questions of the Caucus.

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