Hoping to expand its membership among California's growing Hispanic community, a credit union with branches in Bakersfield and Lamont is launching a loan product that would cover a borrower's U.S. citizenship application fee.
Starting March 1, Community Trust, a division of North Carolina-based Self-Help Federal Credit Union, plans to offer $1,000 citizenship application loans, or up to $4,000 for a family of applicants. The products would carry 12 percent interest, or less if the borrower pays off the principal before receiving the disbursement.
Though not unique in California, the credit union's Citizenship Loan product is part of what observers say is a promising strategy to engage with a segment of the population underserved by financial institutions.
"I think you will find that credit unions are very interested in serving the underbanked and unbanked populations," said Tena Lozano, manager of consumer advocacy for the California and Nevada Credit Union Leagues.
Self-Help Executive Vice President Joe Duran said the idea is to bring people into the fold who, lacking formal relationships with the financial services industry, may fall victim to predatory lending or rely on paycheck cashing services that charge substantial service fees.
Once they become credit union customers, he said, they may decide to open a checking account or even take out a home loan.
"We want to be there for the long-term," he said.
Community Trust is spreading the word about the citizenship loan through its contacts with local nonprofits, just as it has with a related product it calls a Dreamer Loan.
That product offers $465 loans at 8 percent interest -- or a lower rate if the borrower receives the money after paying the principal -- to cover the cost of applying for the Deferred Action for Childhood Arrivals program signed by President Obama in 2012.
DACA, as the program is known, was designed to shield people against deportation who came to the United States without proper authorization as children. It is geared toward immigrants who have pursued an education or military service.
Duran said Community Trust has made about 300 Dreamer Loans.
Among the nonprofits partnering with the credit union to spread word about its two immigrant-focused loan products are Community Action Partnership of Kern and the Dolores Huerta Foundation.
The foundation's work with Community Trust began with a micro-loan program the credit union helped with in 2010. The nonprofit's executive director, Camila Chavez, said the loan products are invaluable to the immigrant community because people earning minimum wage have a hard time raising even $500.
"It's really hard to save," she said. "We're really thankful that, in our area, we have someone that is providing these loans."
CAPK's partnership with Community Trust stems from the credit union's help on the nonprofit's Volunteer Income Tax Assistance program. Community Trust helped people referred by CAPK open their first checking or savings account.
An administrative analyst for the nonprofit, Louis Medina, noted in an email that the credit union is targeting communities that financial institutions may have a hard time reaching.
"We are especially glad that they have a busy office in Lamont, which serves that community as well as Arvin -- areas in which there are documented extreme needs for low-income residents," he wrote.
Self-Help has about two dozen branches in California, and more than 25,000 members in the Central Valley. It reported assets of about $646 million at the end of last year.