In Lans­ing, Mich., a part­ner­ship be­tween banks and a lo­cal credit union is help­ing re­cently re­leased pris­on­ers gain ac­cess to tra­di­tional bank­ing prod­ucts.

Credit Union Journal - - Contents - BY AL­LI­SON PRANG AND AARON PASSMAN

In Lans­ing, Mich., a part­ner­shp be­tween banks and a lo­cal credit union is help­ing re­cently re­leased pris­on­ers gain ac­cess to main­stream fi­nan­cial ser­vices.

PROF­ITABLY SERV­ING LOW-IN­COME con­sumers is a long­stand­ing chal­lenge for many banks and credit unions, but it’s es­pe­cially tricky when the prospects are for­mer pris­on­ers.

Wage gar­nish­ments for old debts, dif­fi­culty find­ing em­ploy­ment with a crim­i­nal record and other is­sues make it hard for th­ese peo­ple to build sig­nif­i­cant de­posit bal­ances, much less be­come cred­it­wor­thy. And then there’s the ad­just­ment to life on the out­side af­ter years, or decades, locked up.

It’s “a whole new world,” said Am­ber Pax­ton, di­rec­tor of the Lans­ing, Mich., Of­fice of Fi­nan­cial Em­pow­er­ment.

Four lo­cal fi­nan­cial in­sti­tu­tions — three banks and one credit union — are work­ing to ease the tran­si­tion for those parolees and pro­ba­tion­ers by help­ing them join the fi­nan­cial main­stream.

For Lans­ing-based CASE Credit Union, par­tic­i­pa­tion helps ful­fill part of the credit union mis­sion of serv­ing the un­der­served.

When CASE be­gan work­ing with var­i­ous com­mu­nity part­ners a few years ago, the idea was just to help serve the un- and un­der-banked. Over time, how­ever, “It evolved into a po­si­tion of ‘We’ve got all of th­ese parolees or pro­ba­tion­ers that no one will touch their money — the banks won’t touch they’re money be­cause they’re felons,’” re­called Karen Casler, com­pli­ance and com­mu­nity de­vel­op­ment man­ager at CASE Credit Union.

“We started go­ing to the pa­role of­fice here in Lans­ing twice a month and sit­ting down with th­ese peo­ple and tak­ing their money and open­ing ac­counts and help­ing them to un­der­stand their fi­nances. Some of them have been in jail so long they didn’t know what a debit card was. Some of them have never writ­ten a check. So we pro­vided in­for­ma­tion to them about a check­ing ac­count and what things you can and can’t do.”

One fac­tor that eases the process for CASE is as a com­mu­nity-char­tered credit union, th­ese new mem­bers aren’t re­quired to be a part of any par­tic­u­lar SEG in or­der to join.

“In the ed­u­ca­tion process, the parolees get ex­plained to them what a bank is and what a credit union is, and then they make their de­ci­sion,” Casler said, ad­ding that none of the par­tic­i­pat­ing in­sti­tu­tions pres­sure par­tic­i­pants to use their ser­vices.


For now, the in­sti­tu­tions are more likely to lose money on the ac­counts, Pax­ton ac­knowl­edged. “It’s a highly un­banked pop­u­la­tion and we know that bank­ing is sort of step one” to fi­nan­cial sta­bil­ity.

CASE has made loans to some par­tic­i­pants, but Casler in­di­cated that is the ex­cep­tion rather than the rule.

And while com­mu­nity-minded ef­forts such as this are part of the credit union DNA, that al­tru­ism is shared by bankers from other par­tic­i­pat­ing in­sti­tu­tions, who framed their in­volve­ment as a mat­ter of duty more than as a growth op­por­tu­nity.

“We have some re­spon­si­bil­ity to try to re-es­tab­lish peo­ple, I be­lieve,” said Sally Rae, ex­ec­u­tive vice pres­i­dent at the $378 mil­lion-as­set Dart Bank in Ma­son, Mich.

The $15.3 bil­lion-as­set Flagstar, based in Troy, Mich., un­der­stands that peo­ple might need a sec­ond chance, Wright said. “It’s one of the great things that we’re able to serve our com­mu­nity by of­fer­ing the op­por­tu­nity to do bank­ing again.”

CASE CU’S par­tic­i­pa­tion comes as Michi­gan credit unions con­tinue to ride a wave of suc­cess, ben­e­fit­ting from larger im­prove­ments in the state’s econ­omy. Ac­cord­ing to re­cent data from CUNA and the Michi­gan Credit Union League, loan growth at Michi­gan CUS grew by more than 11 per­cent dur­ing the first quar­ter of 2017, and roughly half the state’s pop­u­la­tion are now credit union mem­bers.


Amiy­atosh Pur­nanan­dam, a fi­nance pro­fes­sor at the Univer­sity of Michi­gan’s Ross School of Busi­ness, said Lans­ing’s work “should be ap­plauded,” but cau­tioned that the “long-term is­sue” is whether the peo­ple the pro­gram is tar­get­ing will con­tinue to use tra­di­tional bank­ing ser­vices. If a cus­tomer reg­u­larly gets some­thing like a gov­ern­ment check de­posited into their ac­count or some kind of sub­sidy, they’d be more in­clined to keep that re­la­tion­ship, he said.

“Ed­u­ca­tion is a good first step, no doubt about it,” he said.

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