Credit union aims to change cash economy

first_imgNow, the Pacoima Development Federal Credit Union, which celebrates its grand opening today, wants to change that by signing up people such as Marcelino for savings accounts. “Having a bank account changes your life,” said Roberto Barragan, president of the Valley Economic Development Center, which established the credit union. Cash leaves no trace, but an account builds a financial track record that can be leveraged later to borrow money to buy a car or a home. Without one, Barragan asks, “how are you ever going to build up assets?” To open an account at the credit union, an individual needs a Social Security number or an Individual Taxpayer Identification Number, which the IRS issues so noncitizens can pay taxes, plus a government-issued identification card with a picture, such as Mexico’s matricula card. Outreach program PACOIMA – Each week, Anayeli Marcelino stashes a few dollars under her mattress. Marcelino, 22, who is unemployed, saves the money her husband earns at home because she does not have a bank account. Instead, the couple relies on check cashers. “I don’t have a lot of money to save,” said Marcelino through a translator. She came to Los Angeles a year ago from Mexico without documents. Saving money at home is typical of residents in Pacoima, a heavily Latino, working-class community. As many as 75 percent of the area’s 60,000 residents do not use banks, preferring to save their money at home, community leaders and activists estimate. Persuading residents to open savings accounts and use credit cards in place of cash is an uphill battle. To reach out to the community, the credit union offers financial-education classes, and employees make personal visits to parent centers embedded in local schools. Since the Pacoima office opened its doors in January, it has signed up about 500 members. Alex Flores, a married 28-year-old construction worker with two young daughters, used to spend his paycheck as soon as he cashed it. But he opened his first savings account at the credit union after it offered him a car loan at 11 percent interest, significantly lower than rates he found elsewhere. Now, he saves time by paying his cell phone, gym and car bills automatically through the account, and he is paying off a car loan for a 1999 Chrysler 300. “My next step is to talk to them about home loans once I’m done paying for my car,” Flores said. But not everybody in Pacoima is as eager as Flores to sign up for an account. Many residents don’t know American banks are regulated and that deposits are insured by the Federal Deposit Insurance Corp. They recall stories about private banks in Latin America closing and people losing their money. Others, such as Marcelino, don’t bother with an account because their entire paycheck is spent on groceries, rent and supporting relatives back home. Undocumented residents also fear that establishing a paper trail will lead Immigration and Customs Enforcement agents directly to their door. A recent uptick in raids targeting illegal immigrants has left many wary of drawing attention to themselves and underscored the need to have cash on hand in case of deportation. “We are creating fear in them, but wondering why aren’t they opening an account,” said Marta Lopez-Garza, a professor of women’s and Chicano studies at California State University, Northridge. “If you are here illegally, you try to be as invisible as possible.” Building a financial track record through credit may not appeal to immigrants used to spending only what they have in their pocket. Many believe going into debt is inevitable if they use credit cards, especially because so many people carry balances. Almost half of American families carry credit card balances, with the median balance being $2,200, according to the Federal Reserve’s 2004 survey of consumer finances, the most recent available. According to the same survey, 91.4 percent of all American families have some type of checking or savings account. Those without one “were disproportionately likely to have low incomes, to be headed by a person younger than 35, to be non-white or Hispanic, to be headed by a person who was neither working nor retired, to be renters, or to have relatively low levels of wealth,” the survey found. Wells Fargo and Citibank have both operated branches in Pacoima since 2003. Representatives from both chains said their operations were successful – but only after extensive outreach and education. “We had to go far beyond `I’m opening your checking and savings and if you have questions give me a call,”‘ said Steven Contreraz, the Wells Fargo manager. The bank taught customers how to use ATMs, balance their checkbook, and fill out withdrawal and deposit slips – things many consumers take for granted. Wells Fargo also hired bilingual staffers and decorated the store with Latino artwork. “Having to develop a rapport and trust with these clients was first and foremost,” Contreraz said. Cash-based economy But despite ongoing financial-literacy programs by the banks, nonprofits and schools, a cash-based economy persists in Pacoima. Many businesses have fully adapted to wheeling and dealing in greenbacks. At Williams Furniture & Appliances on San Fernando Road, proprietor Mel Williams cashes checks for free as long as the individual makes a payment toward his balance. Williams asks for monthly payments of between $25 and $200 for the couch sets, hutches and lamps he sells from a worn-down building that rumbles when trains cross the tracks across the street. Most of his customers pay with portions of checks from work, Social Security or disability based on a system of credit that comes down to Williams’ intuition. “I don’t have any set rules,” said Williams, sitting behind his desk near a mini-fridge stocked with tiny bottles of water he offers to customers. “A lot of it is feeling, a gut feeling.” Potential clients hand over the names and numbers of their neighbors and employers to help Williams determine whether a customer is who they say they are. Clients lacking a Social Security number can co-sign with a relative who already has an account. Williams charges 21 percent to 22 percent interest. About 15 percent of his clients never pay up, and often he has to coax customers into paying after they fall behind. Vallarta Supermarkets cashes checks without fees as long as customers spend a portion of their money on groceries. Del Gaudio Market has similar options. The alternative is check cashing businesses such as Payday Loan Store or Advance America Cash Advance. At Check N Go in Pacoima, a teller will fork over $100 if you write them a check for $117.64. Relying solely on cash has its downsides. Carrying large amounts of money can make people vulnerable to crime. Detective David Escoto sees an average of seven robberies a week in the Foothill Division of the Los Angeles Police Department, which includes Pacoima. Most of the thefts occur in Pacoima and neighboring Arleta. “Robbers are opportunists,” Escoto said. “If they see someone walking down the street and they know illegal immigrants carry a lot of cash, they will be targeted. It happens.” Savvy residents carry two wallets, says Edwin Ramirez, a community activist who stepped down from the Neighborhood Council in December: a real one with their identification and money, and a cheap throwaway with a few bills to hand over if mugged. “When you get robbed,” Ramirez said, “they don’t want the robber to be upset for not getting anything.” [email protected] (818) 713-3735 Financial facts Q: Can banks legally give the undocumented accounts? A: Yes, if they have proper identification. Q: What identification do they need? A: Many financial institutions will start an account with two forms of government-issued identification, including those from foreign countries, plus an Individual Taxpayer Identification Number (IRS form W-7). Q: Why does the IRS give undocumented immigrants an ITIN? A: The IRS does not care about a filer’s status. It just wants to collect taxes.160Want local news?Sign up for the Localist and stay informed Something went wrong. 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