Article

Offering Access to Funds to People Who Need It

smiling man sitting in a car
By Richard Romero

7 minutes

To better serve its community, Seattle Credit Union disconnected ‘low income’ from ‘high risk’ and reorganized a legacy board that was focused on preserving history.

The credit union movement’s founding principle was for community members to pool resources so people in need of loans could have access to funds. I often look to these words for inspiration on the vision and mission of my credit union—so much so that about seven years ago, Seattle Credit Union embarked on a complete change of direction that included everything from rebranding to extensive staff training to the redefining of our mission and vision.

It was almost an insurmountable task as we faced reinventing an 81-year-old organization. The goal was to ensure that we did not simply implement another “campaign” but instead reinvented the culture of the organization to focus on the basic founding principle of “pooling resources so people in need of loans could have access to funds.”   

In a city where income levels are on the rise at one of the fastest rates in America, a significant gap has developed in Seattle between low-income and high-income earners. It became quite clear that this division was delineated by ethnic boundaries, meaning that most of the low-income communities are communities of color—or BIPOC communities with residents who are Black, Indigenous or people of color. As we placed a greater focus on these BIPOC communities, we were faced with thinking outside the box—outside of the boundaries that have been in place in the financial industry for centuries.  

As we developed products and services aimed at these groups, it became clear that we would need alignment from the top of the organization to the bottom. The challenge: How do we align our board of directors to a mission and vision that includes breaking away from our traditional conservative products and services, which are designed to minimize risk and exclude many BIPOC communities as a result? Many things needed to change, starting with two main areas:

  • disconnecting the concept that low-income equals high risk or sub-prime and
  • reorganizing a legacy board of directors that was focused on preserving history.  

Disconnecting Low-Income from High Risk/Sub-Prime

There is a misperception that low-income people equate to high delinquency and high risk. On the surface, people may think that those who have less are less likely to pay on a loan than those who have more. In my experience, this is not true.  

I speak from personal experience, having been raised low-income, by a single parent as an immigrant. I harken back to when our family did not have an auto, to the days of walking to the grocery store with my mother and using her collapsible shopping cart to bring the groceries back to our apartment. When my mother saved enough to buy her first car, a used 1971 VW, it changed our lives. The change was so significant that this VW became one of the most valuable assets we had. It opened the door to having transportation to school, shopping, vacations, work and to the simple freedom to go where and when you wanted to go. My mother kept that VW for over 14 years.  

I share this personal insight with you to show you two things: First, a low-income person/family will value a loan for a vehicle because it is a life-changer. They are less likely to walk away from a vehicle loan than, say, someone who purchased an $80,000 luxury vehicle and can’t afford to make the large payment.

When done responsibly, lending to low-income people meets the basic foundation of “helping people to have access to funds.” When we do it, we are creating upward mobility for communities that are financially abused by predatory lenders—like used car lots that are charging up to 30% interest rates. What else is in it for your credit union? Taking a 30% auto loan and refinancing it to a responsible rate, let’s just say around 12%, not only has a positive impact on the borrower, but it creates higher revenue for your credit union—revenue that also includes room for loss reserves.

The second thing I would like to show is that my personal experience has created the empathy that I have that allows me to see beyond stereotypes. This empathy is critical in understanding what needs to change in our industry. This change includes needing to have representation from the very people we want to and should be serving. The challenge we experienced was finding a way to get around board members who were not aligned and or not willing to align with our new vision and mission.

I will never forget discussing the concept of focusing on low-income people, mainly auto loans at the time, and having a board member enthusiastically agree, with the condition that we place GPS trackers in all the cars that are owned by “these people” so we could shut them down remotely and take them back when they stop paying. It was at this moment that I realized it was absolutely critical to educate the board and staff on what low-income really means. This was also the moment it became apparent that we would be faced with people who simply would not open their minds to this concept. These people would result in a misalignment between their personal beliefs and our mission and vision. Misalignment will result in failure.

Realigning the Board of Directors

Board alignment to mission and vision is absolutely crucial for success. The most important thing we did was to identify what facets of diversity—age, professional experience, gender, sexual orientation, education, the list goes on—were important to our vision and we created a simple matrix to identify our strengths and weaknesses. This matrix was our north star on how we needed to recruit to ensure that our board would represent the membership we are focused on serving.

  • You often hear, “What if we can’t find candidates of color to fill positions?” Putting it politely, this is an excuse. Once we determined who we were recruiting, it was important to start creating networks into communities we wanted to represent. Many organizations can provide quality candidates. Today, the Seattle CU Board of Directors represents multiple ethnicities, age groups and backgrounds. According to a 2017 survey by the Investor Responsibility Research Center Institute, the median average age for directors on boards across all industries is 62.4 years.   From having a younger LatinX chairman to representation from the LGBTQ community to only having one male Caucasian board member, Seattle CU’s board has morphed into one that is mission-focused and has the purpose of expanding access to all communities.
  • Many  programs are designed to train and develop board members for non-profit boards. These are attached to universities, non-profit organizations and even professional groups, including CUES. Start these relationships and develop them. They are as critical to your business as are select employee groups and other business partners. (Free hint: This also works for recruiting employees who represent BIPOC communities.)
  • Lastly, look at your board governance program. Does it support change, diversity, training and development of your board? Or does it protect the status quo and legacy beliefs and practices? Does it support renewal? Yes, I’ll say the dirty words “term limits”? These are best practices of high-functioning boards.

If you disagree, and feel that legacy, history and protecting “what makes us great” is a top priority, step back and ask yourself, “Does it support our basic philosophy of pooling resources so people in need of loans can have access to funds”? Then after you answer that question, challenge yourself and ask, “Which people in need”?  

I’ve been in the banking world for over 30 years. It took a long time for me to understand and admit that I am part of a system designed hundreds of years ago that benefits those who have and penalizes those who don’t. My goal in life is to break this system by challenging assumptions and systems that create an unequal playing field for those who have been and are being left behind.

CUES member Richard Romero is President/CEO of $959 million Seattle Credit Union, Seattle, and a member of the CUES Board of Directors.

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