🔒Local credit unions see opportunity as community-development lenders

Jayne Defrancesco, a Hamden grandmother raising her three grandkids, wanted a reliable car.

Defrancesco’s old car needed extensive repairs after 300,000 miles. So, in March she turned to Nutmeg State Financial Credit Union, a Rocky Hill member credit cooperative specially designated to financially aid low-income members and the community.

After enrolling in Nutmeg’s “Working Wheels” borrower-financial literacy program, Defrancesco — following several weeks of financial tutoring — bought a 2010 Nissan Rogue with 100,000 miles for $8,600 using a relatively low-interest auto loan from the credit union.

The program isn’t just another public-relations attempt by a lender to help low-income and credit-challenged residents. Instead, it’s Nutmeg’s latest initiative as a Community Development Credit Union and Community Development Financial Institution (CDFI), national and federal designations, respectively, aimed at boosting low-income consumers’ financial IQs, as well as access to loans and other financial services.

Only four Connecticut credit unions have the CDCU designation, making them eligible for millions of dollars in grant funding from the U.S. Treasury, among other benefits. In exchange, they must issue 60 percent or more of their lendable funds to target markets, including disenfranchised neighborhoods or communities, and minority populations.

Three out of four of those credit unions also have CDFI designations, whose other members include unregulated community development organizations, such as Hartford’s HEDCO, which stakes “micro’’ and other loans to small businesses.

They’re all playing a role in trying to chip away at the 20.8 percent of Connecticut residents who are unbanked or underbanked, according to the Federal Deposit Insurance Corp.

Dana Clark, Nutmeg’s vice president for lending, said the credit cooperative identified that its target market, including Hartford, Middlesex, Tolland and New Haven counties, and parts of Fairfield County, was populated with minority and low-income residents who coveted better access to banking services.

“It is for this reason we made the strategic decision to become a CDFI and CDCU credit union,” Clark said.

Her credit union’s CDFI/CDCU designations, Clark said, offer a way for it to deepen its marketing connection with its neediest members, while simultaneously improving consumers’ accessibility to checking/deposit services, auto loans, mortgages and home-equity lines of credit.

Beyond that, the tags allow Nutmeg and other similar credit unions to stand out in the highly competitive banking sector that has extended its reach online and onto mobile devices.

“It’s an opportunity for them to show they’re different from a normal bank,’’ said Jules Epstein-Hebert, program officer for Inclusiv, a New York CDCU-support organization that provides tutorial and other programming and funding access to its steadily growing ranks of CU members.

Inclusiv’s programming enables member CUs to fulfill their community-support obligations under their state and federal banking charters. Commercial banks and thrifts, too, have similar obligations.

Its more than 260 members have provided financial education and counseling to some 8.5 million U.S. consumers, and issued affordable and equitable loans totaling $77.1 billion, according to Inclusiv’s 2019 first-quarter report.

Along with Nutmeg State, one of Connecticut’s largest credit co-ops with $455 million in assets, Hartford’s Cencap Federal Credit Union (formerly Hartford Municipal Employees CU), plus two other CUs in Bridgeport and Greenwich, are Inclusiv members.

A Cencap official said her $45 million-asset credit union has leveraged its CDFI designation to obtain grant funding to upgrade its data-processing systems, train staff, and counsel members and teach them financial literacy.

One-on-one

Nutmeg in 2016 chose to focus on becoming a CDFI, Clark said. But even before that, since 2011, Nutmeg had diversified its minority outreach, including hiring bilingual staff to its markets’ growing Hispanic population.

Nutmeg also introduced a new checking and savings account, among other products and services, Clark said. It also rewrote policies and procedures to reflect, among other things, its ability to accept alternative forms of identification to open an account.

But perhaps the CU’s most innovative effort is Working Wheels, which Clark says “is a car-ownership program that focuses not only on the loan, but all aspects of car ownership.”

Since Working Wheels launched in May, Nutmeg has closed five loans, including Defrancesco’s, averaging $8,000 for a three-year term, with a fixed interest rate of 12 percent, Clark said. Ten more were in the pipeline as of late May.

“Not having reliable transportation is definitely a problem’’ for some Nutmeg members, Clark said. “This is an effort to try to help with that.’’

Nutmeg’s Working Wheels application-review process mirrors its usual loan process, but with some key variations. Wheels applicants undergo a two-week long approval — rather than the usual one-day review/approval turnaround — in which Nutmeg loan underwriters review applicants’ credit histories.

However, credit records only serve as guideposts — not a reason to reject applicants — to help Nutmeg craft a financial-literacy tutorial for each.

The literacy-training, Clark says, plus rate discounts Nutmeg offers Working Wheels borrowers who pay on time, are the reason none of its Working Wheels loans is past due.

In Defrancesco’s case, she was required to write an essay about what a new car would mean for her and her family financially. She also learned how to balance her checkbook, set up and stick to a household budget, and received advice on bill paying.

Defrancesco, who for a time relied on public transit to get back and forth to her food-service job, said her used Rogue SUV “really fit my needs.”

“It’s life-changing as far as I’m concerned,” she said.