REAL Solutions Toolkits

Over the past few years, NCUF, through its REAL Solutions program, has created a variety of toolkits to help credit unions in the following areas:

Non-Prime Auto Lending

While lenders use different criteria and credit scores to differentiate prime from non-prime loans, generally those applicants with C credit and lower will be considered non-prime borrowers. Most lenders, including credit unions, are apt to charge higher interest rates for non-prime loans over prime because they carry higher delinquency and loss risk. Most American workers (88%) drive to work. Not owning a car is a barrier to economic mobility and decreases a person’s chance of improving job opportunities. Those with credit challenges are often forced to use predatory buy here/pay here auto lots, where they are more apt to be sold a poor quality car at a questionable price and interest rate, regardless of the buyer’s ability to repay. If the buyer misses even one payment, the car is repossessed. Credit unions should want to make more auto loans, especially in the current slow-growth market environment.
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VITA Sites and Refund Anticipation Loans

The Internal Revenue Service Volunteer Income Tax Assistance (VITA) Site Program offers free tax help to taxpayers who qualify, generally those with incomes of $49,000 or less. The program provides trained and certified community and credit union volunteers to help taxpayers with special tax credits and completion of their returns. Refund Anticipation Loans (RALs) are short-term (generally one to two weeks) secured by a taxpayer’s expected tax refund. They generally come with extremely high costs, often carrying triple digit Annual Percentage Rates (APRs).

Through participation in the VITA program, credit unions help lower-income consumers keep more of their EITC refunds in their own pockets. Credit unions help their communities and help connect more families to the benefits of credit union membership. Credit unions can also offer an alternative product to a RAL. Alternative RALs, however, come with some risk, lots of work, and little return initially. Converting RAL borrowers into loyal, productive members requires more work, but that is where the payoffs begin.
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Check Cashing

More than 30 million Americans do not have traditional bank accounts and use check cashers as alternative financial outlets to perform basic financial services. Many users of check cashers have no or a limited relationship with a financial institution, and rely on the alternative financial services sector to cash payroll or government checks. These individuals are potential candidates for new members, a source of new business, and a potential source of income to the credit union.

Credit unions can be part of the solution to high cost check cashers by offering reasonable fee-based check cashing services to members and potential members that represent a good value for the consumer, but a sustainable service for the credit union. For most consumers using check cashers, the credit union fees would be less onerous, putting more money back into consumers’ wallets. For credit unions, offering a first-step transaction service like check cashing, moves the member along the path to financial wealth and builds loyalty and healthy financial habits.
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Payday Loan Alternatives

An estimated 15 to 20 % of credit union members are using or have used a payday loan product sometime within the past five years. A payday loan is a small short term cash loan with an average term of usually 14 days. These loans are available at a variety of alternative financial service providers and generally have a fee per hundred borrowed resulting in triple digit interest rates. Members using this product are often caught in a cycle of debt making it difficult to honor obligations – such as credit union loans – or to save for the future.

Members turn to alternative providers because they provide fast and easy loan approval with few questions asked or because they do not want their credit union to know they are having financial difficulties. Credit unions may consider offering an affordable payday loan alternative that is sustainable for the credit union. There are hundreds of credit unions providing their member’s affordable solutions.
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Fresh Start / Second Chance Checking

Most banks and many credit unions use Chexsystems or TeleCheck as a decision maker for opening a checking account for an individual. However, a negative ChexSystems record can make it difficult for an individual to open a checking account with another institution, thus joining the 40 million households that are under-banked. A 2nd Chance Checking product allows individuals who have had past checking blemishes to get back into mainstream banking. By offering a 2nd chance or fresh start checking account to members, credit unions have the opportunity to help individuals save money by moving them out of check cashing stores and into credit union lobbies, where they can become valuable, loyal members. Credit unions can use their existing checking product or develop a second product, but with some restrictions built into the product for those with past checking blemishes.
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Low Wealth Savings Programs

Thirty million workers in the U.S. today between the ages of 18 and 64 earn $9 per hour or less. A single catastrophic event such as an illness can leave these families without shelter or adequate food if they have no savings on which to fall back. Helping households of modest means build wealth is part of the credit union social mission. Credit unions can develop creative, innovative savings products to help the small saver build wealth, step by step, over time. Credit unions can help their members develop savings goals and make saving money manageable and easy through monthly or weekly automatic transfers. Credit unions were the forerunners of “pay yourself first.”

Now credit union executives who wish to implement products to help low-wealth households establish savings have a practical and objective implementation guide at their fingertips. The REAL Solutions® Savings Products for Low-Wealth Households Implementation Guide was developed by Nancy Pierce, Ph.D. – President of Tipton Research Group in Kansas City, MO – for the National Credit Union Foundation (NCUF). As a REAL Solutions® Field Coach, Nancy has worked through nine state leagues/associations to help hundreds of credit unions develop and implement products & services for modest means households to build wealth and financial security.
Click here to download Implementation Guide