When San Mateo Credit Union opens a branch in East Palo Alto at the end of this year, residents will get a financial institution with experience serving low-income communities with high immigrant populations, Stephen Tabler, vice president of marketing, said.
East Palo Alto residents learned in June that their only bank, California Bank & Trust, would close its branch on Aug. 26 as part of a consolidating effort. Predatory-lending foes begged the bank to stay, saying its departure would push many residents back to unscrupulous mortgage brokers and "payday" lenders who charge exorbitant fees for services. But bank officials said there weren't enough accounts to justify staying.
San Mateo Credit Union officials, however, said they have had an eye on East Palo Alto for 10 years and they've learned much from serving the North Fair Oaks community in Redwood City, which is made up largely of Latino residents and lacks banking experience.
San Mateo Credit Union is a nonprofit organization and its core clients are county employees. But the credit union's membership is open to the general public and offers many of the same services of larger, for-profit banks at lower interest rates, Tabler said.
The credit union's board of directors began asking staff in October 2010 to look for opportunities because the country seemed to be coming out of the recession, Tabler said. Board members wanted the credit union to be ready for opportunities.
"We did a research study in 52 zip codes in the Bay Area and evaluated overall opportunities in credit lending and auto lending," he said.
Community Legal Services in East Palo Alto, which litigates against predatory lending and offers residents financial-literacy education, invited the credit union to consider opening a branch. Credit union officials looked at their data for the top 10 zip codes with potential for auto lending and decided the city would be a good bet, Tabler said.
"Based on our experiences with the branch in North Fair Oaks, we believe that we can really make an impact," he said.
The credit union can offer small-dollar loans that traditional banks don't offer and low-interest vehicle loans, Tabler said.
"Staffing is the biggest challenge. We've opened three new branches in the last five years. You need the right manager who understands the culture of the community," he said.
The decision came quickly, within four to six weeks. The credit union signed a lease in July and is scheduled to open in the fourth quarter of the year, he said. Much depends on when California Bank vacates the premises, he added.
Keith Ogden, staff attorney with Community Legal Services' anti-predatory lending and foreclosure-prevention program, said his organization is working with the credit union to create products that will best serve East Palo Alto residents.
Credit unions provide real opportunities for working with communities that aren't usually available with traditional banks, he said.
"The credit union model is based on this idea that the members are members of a community and collectively the work to help each other out," he said.