Will credit unions solve the affordable financial services crisis?

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By JOSE A. GIRALT

During a press event announcing the launch of the Bronx People’s Federal Credit Union, members of the Bronx Financial Access Coalition speak at Boricua College Plaza on Tuesday, July 19, 2022. The van will provide banking services to customers across the ‘borough.
Photo by José A. Giralt

When Sonya Ferguson started calculating how much it cost her to top up her prepaid debit card, she wondered if there was a better way. His primary method of banking was through check cashing outlets and pawnshops. Recalling a recent experience, she said, “I asked for a prepaid card and they said ‘$10.’ I said ‘Okay, I want to put $100 on it.’ They said ‘$5 you have to pay to put $100 on your prepaid card.’ I said, ‘But it’s my card!’ »

Ferguson said she realized she didn’t have enough money for the next day, so she went to an ATM to withdraw cash and had to pay another $5 for this privilege. “So when we do the math, I lost $20,” she said.

Experiences like Ferguson’s are not uncommon in areas that have more check-cashing stores than established banks. Ferguson, 62, was born and raised in the Bronx and has seen her community neglected for far too long when it comes to banking. On July 19, she attended the launch, outside the Bronx campus of Boricua College, of the Bronx People’s Federal Credit Union which, for now, operates out of a modified van, bringing banking and d other financial services to neighborhoods underserved by the largest banks.

The Bronx Financial Access Coalition (BXFAC), made up of the Banana Kelly Community Improvement Association, the University Neighborhood Housing Program, We Stay/Nos Quedamos and the Women’s Housing and Economic Development Corporation (WHEDco), has partnered with Caisse Federal People’s Lower East Side. (LES People’s FCU), Webster Bank and partners such as The Drivers’ Coop, The Association for Neighborhood and Housing Development, New Economy Project and Boricua College to carry out the project.

Webster Bank is providing financing for the new mobile credit union. The deal was originally initiated by Sterling National Bank, but recently merged with Webster. LES People’s FCU CEO Aissatou Barry-Fall expressed her optimism for the partnership in a press release. “We are excited to expand to the North Borough and create the Bronx People’s Federal Credit Union in partnership with the Bronx Financial Access Coalition,” he said.

During a press event announcing the launch of the Bronx People’s Federal Credit Union, members of the Bronx Financial Access Coalition speak at Boricua College Plaza on Tuesday, July 19, 2022. The van will provide banking services to customers across the ‘borough.
Photo by José A. Giralt

“These communities not only need financial services, they need affordable financial services. Today we proudly announce our goal of establishing a permanent branch in the Bronx by the end of 2023.”

A major difference, which affects affordability between a traditional bank and a credit union, is that banks are for-profit institutions, while credit unions are non-profit organizations. This distinction plays an important role in why banks must charge fees for some of their services, while credit unions charge no fees or nominal fees for services, and charge lower rates for loans. As stated in Forbes Advisor“Banks are in business to make a profit. This means that banks focus on making that profit, rather than focusing specifically on the needs of the account holder.

The newamerican.org website Maps financial opportunity to show the ratio of alternative/traditional financial services across America.

A specific location for a permanent brick-and-mortar credit union branch has yet to be announced, but the van made several stops in the South Bronx and was at Grand Concourse and East 196th Street on August 11.

Closer to home in the North Bronx, Norwood News has covered several bank branch closures over the past few years. As early as 2008, articles about bank branches described the Bronx as “New York’s most underbanked borough.” A number of bank and ATM robberies burglaries, didn’t help matters, like the one that happened at the Bank of America ATM on Jerome Avenue in Norwood on Friday, November 6, 2020.

Norwood News also quite recently reported on a bank robbery at Capital One Bank at East Fordham Road and East 190th Street at Fordham Manor on Friday, October 14, 2022. Earlier this year on February 10, we also reported how a homeless man used a hammer to smash the window of a Capital One Bank branch at Bainbridge Avenue and East 206th Street in Norwood with a hammer.

There were some openings, however, such as the opening of a new Norwood branch of Ridgewood Savings Bank at 320 East 204th Street on September 14, 2021. As reported, the bank was named America’s Best Bank by Forbes for the third consecutive year. There was also relief when the Sedgwick Avenue branch of the Ridgewood Savings Bank finally stayed openand when the Chase bank on Burnside Avenue reopened. A rally also took place on August 24, 2020 to reopen the Amalgamated Bank branch located on Burnside Avenue in Mt. Hope.

Results of a survey covering the neighborhoods of Crotona Park East and Morrisania released in May 2019 by WHEDco, revealed that 24.2% of respondents did not have a US bank account. One of the most common reasons given was, “I can’t maintain the minimum balance required.” Another was “There is no bank in my neighborhood”. The study went on to identify the Bronx as having “the lowest concentration of bank branches per household in the nation and the highest concentration of unbanked households in New York.”

Making banking services more affordable through a credit union is seen as a much-needed option in neighborhoods deemed underserved by local community leaders. Kerry McClean is Vice President of Community Development at WHEDco and spoke at the launch event. “I am an immigrant from the Bronx myself and have been here for decades,” she told the crowd. “I’ve seen it myself with my own family, how the lack of access to convenient branches can really impact your ability to keep your hard-earned money in your pocket.

Referring to the new mobile credit union, she said, “More people, especially low- and middle-income people, will be able to keep more of their dollars in their pockets and not take them out in maintenance fees, overdraft, adverse credit, and inflexible loans.

As president of the Banana Kelly Block Association and a member of Bronx Community Board 2 (CB2), Ferguson is painfully aware of how a community suffers when banks are scarce and check cashing stores proliferate. She welcomes the arrival of affordable financial services in her neighborhood and wants others to know the benefits of a mobile credit union. “I joined the credit union because it’s for people, and I like the idea of ​​belonging to something,” she says. “The part about repairing your credit is great, and a free ATM is even better. Now I can say I’m a member of a financial institution.

*Síle Moloney contributed to this story.

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