SERVING THOSE WHO HAVE SERVED...TIME
In Lansing, Mich., a partnership between banks and a local credit union is helping recently released prisoners gain access to traditional banking products.
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.
‘A GOOD FIRST STEP’
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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