Church-based credit unions help members


PHILADELPHIA -- In 1959, a dozen deacons at Denver's Zion Baptist Church pooled $75.41 to form a credit union so church widows could obtain small loans.

The widows, who typically did household jobs and got paid in cash, couldn't get traditional bank loans.

Around the country, about 500 church-associated credit unions with a combined $2.9 billion in deposits make loans and teach financial literacy to members, some of whom might otherwise use predatory payday lenders or pawn shops to get by.

"It's surprising how many people do not even know how to develop a budget," said Sally Edwards, a consultant to Zion's now-thriving credit union.

In West Philadelphia on Saturday, Sharon Baptist Church opened a branch of its New Life Credit Union to the community, under a federal rule that lets credit unions serve nonmembers of their organization in low-income neighborhoods. About 50 people signed up, depositing at least the $6 minimum required to open an account.

Single mother Kim Fuller, 34, is using her account to save for her first house. Since September, she's amassed about $1,000 toward a down payment. And with the credit union's help, she's enrolled in a state program that matches savings of up to $2,000 for low-income home buyers.

The four-digit balance marks an impressive turnaround for Fuller, who as a young adult racked up $20,000 in credit-card debt. She had gotten a $15,000-a-year job with an insurance firm after high school - and soon maxed out seven credit cards.

"For an 18-year-old, that seemed like so much money," Fuller said. "I splurged."

But she lost the job after a serious car accident, and later had a son, now 10.

With bills mounting, Fuller left her apartment last year and moved in with her parents. She now has an $18-an-hour job at a hospital, and has knocked her debt down to less than $1,000.

"We do not do any excessive buying," Fuller said Sunday at Sharon Baptist's credit union, which is open between the 7,000-member megachurch's two services.

Commercial banks often support faith- and community-based credit unions with startup money - perhaps $100,000 - to meet the banks' community reinvestment requirements. And the credit unions are generally too small, and their services too limited, to pose a competitive threat.

Their loan default rate is no higher than those of traditional credit unions, although their members may need to refinance to stretch out payments, a federal regulator said.

"If the credit unions really do the credit counseling ... and they work with the person, the charge-off rates aren't higher than they are for any other group," said Debbie Matz, a board member of the National Credit Union Association, which supervises credit unions.

Many church credit unions offer free classes in budgeting, buying a first home and other financial topics.

Through mergers and joint loan programs, some faith-based credit unions make larger loans to fund church construction or help a nonprofit group stay afloat until its next grant arrives.



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