Until 2011, the Borinquen Federal Credit Union offered residents of South Kensington a local banking option where they could open a savings account, apply for a loan, or seek financial assistance, all in their own neighborhood.
Then the 35-year-old institution ran into some financial and legal trouble, ranging from mismanagement to outright fraud.The National Credit Union Association, which insures savings at credit unions, took over the bank in the summer of 2011 and shut it down less than a month later.
Since then, nothing has taken its place. Not entirely anyway.
FINANTA, a community development financial institution (CDFI) located just off American Street in South Kensington, has provided financial capital to the area for the last 18 years in the form of business loans, mortgages and technical assistance. But Finanta is not a bank, and it’s unable to provide certain crucial services.
That could be about to change as FINANTA works on forming its own credit union, which are member-owned, generally community-based banks. It would provide access to basic financial services and products, such as debit cards, checking or savings accounts and check cashing.
“FINANTA doesn’t offer traditional banking services,” said Chris Ortiz, an intern for FINANTA who is spearheading the effort to form the credit union.
Anyone who lives, works, volunteers or goes to school in the area roughly bound by Olney Avenue on the north, Spring Garden Street on the south, 10th Street on the west, and Front Street on the east will have access to the credit union.
“Finantia is a CDFI and it’s doing great work, but it’s mostly on the finance end,” said Will Gonzales, executive director of Ceiba. This is great, he added, but the low-income, largely Latino population living in this area is still very much in need of basic banking services.
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“We worked very closely with [Borinquen],” Gonzales said, adding that it was “oasis of financial services in the community.”
When Borinquen first set up in the community, Gonzales explained, there was a lot of predatory lending and unregulated procedures at large banks such as overdraft fees that had the effect of “nickel-and-diming” low-income people.
This can still be a problem today, Ortiz said.
“From what I’ve heard so far from the community, the traditional banking system has some fees and barriers that prevent the community from accessing those services,” he said. “Most credit unions do not have some of those membership or user fees, like transaction fees, or they are lower at credit unions.”
The process of forming the credit union could take anywhere from nine months to a year and a half to complete. FINANTA is currently circulating a survey to gauge the interest of stakeholders.
Next steps in the process are to assess the demand, understand the needs of the community and prepare a business plan, as well seek out potential board members. All of this information is sent to the National Credit Union Association for approval, which then grants FINANTA the right to create the credit union.
Photo via Alex Vuocolo-30-
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