Too many Americans walk a financial tightrope. Nationwide, according to Center for Financial Services Innovation (CFSI), 57% of us struggle to achieve financial health; 43% struggle to pay bills and make credit payments; 30% of American households can only make ends meet for three months or fewer in the event of a sudden drop in income; and 27% report having less than $1,000 saved for retirement.
CDFIs are needed more than ever to ensure consumers have access to affordable and responsible financial products and services.
Through collaborations with leading consumer finance advocates and organizations like CFSI, Prudential, National Federation of Community Development Credit Unions (Federation), and others, OFN helps strengthen the role CDFIs play in building financial health for all Americans.
This page offers resources and research by OFN and others on consumer financial services and products. Contact Ginger McNally, Senior Vice President, Strategic Consulting, for more or to learn how you can partner with OFN on consumer finance initiatives or programs.
Connect with OFN
Research, Publications, Resources
Expanding Employer-Based Small Dollar Loan Programs and the CDFI Industry: Learnings from the Knowledge Network (OFN, Center for Financial Services Innovaton, National Federation of Credit Unions, and The Prudential Foundation) In 2016, OFN convened an Employer-Based Small Dollar Loan Knowledge Network. Nine diverse mission-driven lenders with employer-based small dollar loan products met to share strategies and learn about common challenges. This paper offers learnings from the Knowledge Network’s discussions, organized in six areas: Marketing, Outreach, and Employer Engagement; Customer Experience; Technology; Financial Counseling; Impact and Outcomes; and Partnerships. This paper was sponsored with generous support from Prudential.
- Center for Financial Services Innovation (CFSI)—CFSI is the authority on consumer financial health, leading a network of committed financial services innovators to build better consumer products and practices.
- Filene Research Institute— Filene explores issues vital to the future of credit unions and consumer finance through independent research and innovation.
- Credit Builders Alliance (CBA)—CBA helps organizations move people from poverty to prosperity through credit building.
- National Federation of Credit Unions—The Federation is a dynamic, growth-oriented association of credit unions that provide safe and responsible financial services to underserved communities.
Expanding Employer-Based Small Dollar Loan Programs and the CDFI Industry: Learnings from the Knowledge Network (April 2017)
The white paper features findings from a year-long Knowledge Network of CDFI practitioners from around the country actively working with employer-based small dollar loan solutions. Nick Mitchell from Rio Grande Multibank Corporation, a member of the Knowledge Network and a leading practitioner of employer-based lending, will share his experience with implementing this important consumer financial product. View the webinar recording. Download the webinar presentation.
Consumer Marketing that Leads to Effective Customer Engagement (November 2016)
Part of OFN's consumer finance webinar series funded by Prudential Foundation, this webinar provides insights into effective consumer marketing strategies, tactics, and messaging. Presenters from Hope Federal Credit Union and CFSI discuss market research, marketing campaigns, and message distribution, as well how to frame messaging around financial health. View the webinar recording. Download the webinar presentation.
CFPB Proposed Rules for Small-Dollar Loans: An Overview and What It Means for CDFIs (August 2016)
The CFPB recently released proposed regulations on small-dollar loans in an effort to curb predatory practices by payday and auto title lenders. Presenters from OFN and the Center for Responsible Lending discuss the broad implications of the rules on small-dollar lending, specific components of the rules, and how they may or may not affect small-dollar loan products offered by CDFIs. Download the webinar presentation
The Power and Potential of CDFI Credit Union and Loan Fund Partnerships (June 2016)
This webinar discusses ways in which CDFI credit unions and CDFI loan funds leverage each other's work through partnerships that provide greater access to affordable consumer financial products and services. Presenters from OFN and the Federation provide an overview of how CDFI credit unions and loan funds can partner, and the benefits and challenges of these partnerships. Presenters from MariSol Federal Credit Union and Trellis in Phoenix, AZ discuss their partnership to expand the availability of mortgage loans, consumer loans, and other consumer finance products and services in their market. View the webinar recording. Download the webinar presentation.
Better Options for Consumers: Affordable, Responsible Products in the Consumer Finance Marketplace (February 2016)
This webinar provides an overview of various types of affordable and responsible financial products in the consumer finance marketplace. Presenters from Pew Charitable Trusts and CFSI discuss consumer loan, savings and debit products that provide safer financial alternatives for consumers. View the webinar recording. Download the webinar presentation.
Building a Small-Dollar Loan Product (September 2015)
This webinar discusses core components and considerations CDFIs should know when developing a small-dollar loan product. Presenters from the CFSI discuss the Compass Guide to Small Dollar Credit. View the webinar recording.
Strengthening CDFI Borrowers through Credit Reporting (August 2015)
Learn about the importance of credit building for CDFI borrowers. Presenters from Credit Builders Alliance talk about the process of reporting both personal and business credit to the major credit bureaus. View the webinar recording.
Lessons Learned in Developing, Innovating, and Scaling Consumer Financial Products and Services (February 2015)
OFN collaborated with CFSI and Filene Research Institute to present lessons learned from working with credit unions, loan funds, and other nonprofits. Topics covered include behavioral economics, technology innovations, and consumer trends that are helping to shape the next generation of high quality consumer financial products and services. View the webinar recording.
Current Trends in Consumer Behavior and Financial Products (January 2015)
With CFSI, OFN presents an overview of consumer challenges and the underserved marketplace. View the webinar recording.
Appalachian Community Federal Credit Union (ACFCU): Gray, Tennessee
Reaching Remote Appalachia with Technology—and Passion
In some areas of central Appalachia, residents have to travel more than 45 minutes to reach a bank branch. With just 90 people per square mile, one third of what you’d find in major metropolitan areas, mainstream banks have closed up shop.
Appalachian Community Federal Credit Union (ACFCU), a CDFI headquartered in Gray, Tennessee, is helping to fill this financial void.
“It’s really a profit versus passion issue,” says Ron Scott, CEO of ACFCU, which serves an area of approximately 425,000 residents, of which 26 live below the poverty line and 28 percent are unbanked or underbanked. “Serving the underserved is expensive and not really profitable, so many mainstream banks have left. At the credit union, our purpose statement is building financial relationships one member at a time—we provide the passion and stay in the community.”
To reach current and recruit new members in Tennessee, Kentucky, and Virginia, the credit union employs a host of different technologies, including dynamic, state-of-the-art online banking. Even still, reaching people in remote corners of the tri-state region is difficult. Says Ron, “Low population density presents a very real challenge. How can you justify establishing a million dollar branch to serve a community of 100 people?”
After extensive research and strategizing, ACFCU found its answer, once again, in technology—this time in the form of an Interactive Teller Machine (ITM), a unique approach to bringing the credit union’s full suite of services to people who can’t easily access mainstream banks—or whose only other alternatives are payday and car title lenders.
An ITM looks like the ubiquitous ATM but with a video screen that enables members to speak face-to-face with a teller sitting in ACFCU’s headquarters hundreds of miles away. The ITM accepts deposits of cash and checks and dispenses cash and coin. Additionally, members can open new accounts and apply for loans directly at the ITM.
For ACFCU, it’s a win/win: consumers receive all of the traditional services a brick and mortar branch offers but in a convenient location and at a fraction of the cost to ACFCU.
In 2016 and 2017, the credit union will pilot ITMs with community-based nonprofit partners in Kentucky—Berea College in Owsley County and Mountain Comprehensive Health Corporation (MCHC) in Whitesburg—as well as at one of its branches in McKee.
“Having the ITM on site here will be a great asset for our patients,” says Van Breeding, MD, a physician at MCHC. “A lot of our patients have a hard time with transportation. When they do get transportation, they can come here to the clinic to receive medical care, and while they’re here they can do their banking.”
By testing the ITM in three unique locations, ACFCU expects to learn what works well, what doesn’t, and what to improve for further expansion.
The credit union has received a $2 million NEXT Opportunity Award for its innovative ITM strategy. With the Award, it expects to purchase three ITMs for piloting and to deploy $17 million in additional loans throughout its service area.
“The NEXT Awards is going to be huge for us,” says Ron. “I’m really hoping what we’ll do for the most rural areas is provide our members with the opportunity to sit down with someone, just as they would at a branch, even when they’re separated by vast distances.”
Rio Grande Valley Multibank (RGVMB): Brownsville, Texas
Consumer-Friendly Loan Program Tackles Predatory Lending
Texas is one of the poorest states in the country; business is booming for predatory lenders. Payday, car title, and other high-cost, unscrupulous financing services make up a $6 billion-a-year industry that strips $1.5 billion in interest and fees from local economies. For consumers, the loans offer immediate financing when needed, but often trap borrowers in a cycle of debt.
“These payday lenders know they can make money here,” says Nick Mitchell-Bennett, Administrator for Rio Grande Valley Multibank (RGVMB), a CDFI based in Brownsville, Texas on the U.S./Mexico border. “Let’s set up shop in the poorest city in the poorest county in one of the poorest states in the country. That’s what they did. And Texas regulations make it easy for them to do so and to take advantage of people who need short term cash.”
Winner of a $1.6 million NEXT Opportunity Award, RGVMB, a longtime mortgage lender in the Rio Grande Valley, recently became a consumer ally in combating predatory lenders when it launched Community Loan Center (CLC). The program provides easy-to-access loans that are designed with borrowers’ best interest in mind and to compete with harmful loans.
"Our partner nonprofit mortgage companies and nonprofit housing developers were seeing an uptick in payday and car title lending that was affecting buyers’ ability to apply for and be approved for a mortgage,” Nick explains. “We knew we had to do something about it."
RGVMB and its partners spent 18 months discussing alternatives to predatory lenders. CLC was born from this effort.
The program offers employer-based, small-dollar, affordable loans using a franchise model, which has the ability to scale geographically. RGVMB is the leader in envisioning, piloting, and creating the innovative product and proprietary lending platform. The CDFI works with Texas Community Capital (TCC), an Austin-based nonprofit lending intermediary, to market CLC and recruit lenders in different markets. These lenders then enlist local employers, who integrate CLC into their payroll systems. Borrowers apply for the loan online and are approved or denied immediately. Loan payments are then deducted directly from paychecks.
Today, 10 mission-based lenders across three states—Texas, Indiana, and Maryland—offer CLC. More than 100 employers of different sizes include CLC and its optional financial counseling program in their benefits packages. In total, 15,000 CLC loans have saved 8,000 employees more than $7 million.
"What appealed to us about CLC is that it has financial guidance, sets a fixed rate, and is transparent to our employees," says Charlie Cabler, City Manager of Brownsville, which employs 1,300 people. "More than 300 employees have borrowed from CLC. They appreciate knowing exactly what their payments are and when they will pay off the loan. It is a good benefit for the city and a good source of funds when employees have unexpected expenses, like a car repair or medical bill." Without such a program, he says, "employees would struggle to find money or turn to predatory lenders."
With its NEXT Award, RGVMB expects to make more than 13,000 additional loans in the next 10 years, producing more than $10 million in total borrower savings.
Says Matt Hull, Administrator of TCC, which won a 2016 NEXT Seed Capital Award for its strategy to expand CLC in Texas and other states, “CLC keeps capital in the local economy and saves people $775 per loan compared to payday loans in Texas."
As CLC expands into new areas, more families will build stronger financial health and local economies will benefit from having local lenders offering responsible products.
Sunrise Banks: St. Paul, Minnesota
Connecting Consumers to Responsible Loans
Brittany Moore’s mornings are timed with precision. After a lively early morning scramble to leave the house, she drops her young daughter at day care before making the long drive to work. When Brittany’s car broke down, she couldn’t afford to wait to fix it—but she also needed help financing repairs. Luckily, her employer offered Sunrise Banks’ TrueConnect, an affordable short-term, small-dollar loan.
“Without a working car, getting my daughter to day care and myself to work would have been quite a challenge. With TrueConnect, I could pay to get it fixed,” says the financial intelligence analyst. “And, the same time, the loan helps me build credit.”
This is exactly the type of success story Sunrise envisioned when it launched TrueConnect. “Without products like this, people are turning to the payday or auto title loans. Or they borrow from friends and family. And worst-case scenarios are bankruptcies,” says David Reiling, CEO of Sunrise Banks, which won a $2.2 million NEXT Opportunity Award for TrueConnect. “So we set out to offer a small dollar loan product that could compete head-to-head with these risky situations.”
Sunrise’s journey led to TrueConnect. The employer-based loan integrates with payroll systems through proprietary software that’s designed to scale. Based on a borrower’s salary rather than credit score, loans range from $1,000—$3,000 and, to avoid excessive borrowing, cap at 8% of wages. Payments are deducted directly from the borrower’s paycheck over a 12-month period. And Sunrise also offers employers its financial education program to accompany the loan.
The CDFI has successfully piloted the product with three employers in Minnesota, Ohio, and California, including Minnesota Lutheran Social Services (LSS), which employs 2,300 people statewide. “TrueConnect is a great benefit for us,” explains Joyce Norals, LSS, Vice President and Chief Human Resource Officer. “Occasionally employees with hardships or financial needs—maybe an unexpected hospital expense, car repair, or other emergency, or even to pay for a vacation—would come to human resources to ask for a loan. We had to say no, but now we direct them to TrueConnect. It’s easy to use, affordable, and confidential.”
With its NEXT Award, Sunrise plans to expand TrueConnect nationally, starting with new partnerships in Oklahoma, Arizona, Texas, and Florida. It expects to make $20 million in loans, evaluate the product to make necessary changes, and develop metrics to measure success.
“We are honored and humbled to receive the NEXT Award,” David remarks, “It will help us bring TrueConnect to scale nationally and offer a safe loan alternative for those 26 million Americans who do not have a credit score.”
Freedom First Federal Credit Union (FFFCU): Roanoke, Virginia
Opening the Road to Opportunity
The decline of southwestern Virginia’s once booming farm and coal industries brought high rates of poverty and unemployment to the region. Today, well-paying, steady jobs are hard to find and often require training to get ahead. Trucking is one of the few thriving exceptions. Nationwide, there is a shortage of drivers, and, in the Roanoke area, men and women from all walks of life come to CDS Tractor Trailer Training to prepare for the open road.
“The jobs are out there, but people need the training,” explains CDS Vice President Chris Pender. “This can be a major up-front expense for some students. Because programs like ours are non-accredited, and traditional financial aid isn’t available. So people who can’t afford it may have to walk away from the opportunity or find other options.”
Today, Freedom First Federal Credit Union (FFFCU), with its tagline Where people bank for good and a mission to help members prosper and communities thrive, is filling this financing gap through an innovative workforce development loan. In areas of urban and rural southwestern Virginia, the loan provides low-cost, short-term financing for job certificate or licensing programs that give people a better chance at obtaining or advancing in living-wage jobs.
“Without Freedom First, many students would just not have been able to go through this program,” says Chris about CDS graduates, almost all who find full-time driving work after completing the course.
CDS is the first Roanoke organization to pilot the credit union’s innovative workforce development loan. “We came up with this program like we do a lot of others and that’s by being out in the community. Community engagement makes us aware; if we’re listening, there are opportunities to partner, develop, and deliver programs,” FFFCU CEO Paul Phillips says. “When CDS told us that traditional student loan financing isn’t available to their students, we thought ‘that’s something we can do.’ So we adapted a basic unsecured loan for CDS that we deliver in partnership with them.”
The credit union doesn’t stop with the affordable, short-term loan. It also teaches CDS students how to bank remotely, budget, save, and build their families’ financial health. And it encourages borrowers, who automatically become credit union members, to access the FFFCU’s full range of consumer financial products and services well after the terms of the loan expire.
FFFCU won a $1.725 million NEXT Opportunity Award to expand the workforce loan into new industries such as health care and welding; both of which have identified a shortage of skilled workers now and in the future. With the Award, the CDFI expects to deploy $1.5 million in loans, establish a loan loss reserve fund, and hire a loan administrator.
Paul says, “These funds will ultimately help hundreds of people in southwest Virginia secure a job with sustainable workforce skills, and grow the local economy by creating more jobs.”
Lower East Side People’s Federal Credit Union: New York, New York
Bringing Resources to Underbanked New York Communities
“I was walking down Adam Clayton Powell Boulevard one day and had in mind to open a bank account. I saw Lower East Side People’s Federal Credit Union and became a member,” says Steward Mitchell, a Harlem resident at the time. That was 2010, and he says, ever since, “It’s been very good to me. I’ve opened a checking and savings account, and the credit union’s financial counseling and planning programs helped me start a budget and a plan. They’re great people; they really care.”
Steward is one of approximately 20,000 people across New York City, from mostly low-income and immigrant communities, who have found a financial home at LESPFCU in the credit union’s 30 years of existence. In this time, the CDFI has reinvested more than $77 million into the community in the form of loans, and mobilized more than $30 million in local savings.
“We provide a very wide range of products and services—savings, checking, and money market accounts, CDs, consumer and business loans, credit cards, and mortgages for low-income housing co-ops,” says Linda Levy, LESPFCU’s CEO. “From the very beginning, we’ve tried be a full service financial institution alternative to commercial banks so that our members would not feel like they are getting second rate services.”
Currently, New York City’s largest community development credit union operates three branches in Manhattan’s Lower East Side and East and Central Harlem. It also runs an innovative full-service mobile bus branch that travels from borough to borough and features two offices, an ATM, and a teller window.
This footprint is about to grow. The CDFI won a $1.725 million NEXT Opportunity Award to expand in three neighborhoods—Manhattan’s East Harlem; Staten Island’s North Shore; and Jackson Heights in Queens—where there is great need for responsible financial services, loans, and education.
The expansion comes in response to community demand, which is partly determined through the mobile branch. Linda explains, “Community groups ask us to bring the bus to them, and if it’s a right fit we do. For example, we have been bringing the mobile branch to Staten Island for a year. It’s enabled us to determine what the needs are and identify the community’s commitment to what we offer.”
With the NEXT Award, LESPFCU expects to set up a permanent location in Staten Island and establish a storefront in East Harlem, as well as increase its presence in Jackson Heights. The grant piece of the Award will be used for business planning and building out the Staten Island space. And the secondary capital portion of the Award will enable the credit union to grow in members and size of deposits without affecting its bottom line.
Says Linda, “With this expansion we expect to provide affordable financial services to more than 10,000 members in NYC and finance over $5 million in loans for affordable housing, debt consolidation, immigration relief, credit building, and other consumer needs.”
The Housing Fund: Nashville, TN
The Housing Fund Creates a Mortgage for Everyone
More than 80,000 Hispanic, Pacific Rim, Kurd, Egyptian, Somali, and Sudanese, immigrants live in Nashville and middle Tennessee as New Americans. Many dream of purchasing a home but can’t apply for a traditional mortgage because of ethical norms. The Housing Fund (THF), a CDFI with locations in Nashville and Clarksville, Tennessee, is establishing a unique home loan solution to provide them with the opportunity of home ownership.
“The Housing Fund has been around for 20 years,” explained Angela Belcher, Program Coordinator at THF. “Every time we look at a new service or product it’s because we face a barrier to fulfilling our mission, which is to provide resources and creative leadership to help individuals and communities create and maintain affordable and healthy places in which low and moderate income people live.”
THF recognized a gap in the mortgage marketplace for products that adhere to certain cultural beliefs about lending. The CDFI began working closely with local community representatives and bankers to implement an Alternative Payment Plan mortgage loan product in compliance with cultural norms and ethical financing.
“One of our board members is a city council person,” said Angela. “He came to us and said constituents in his district didn’t have access to mortgages that complied with their beliefs. We saw the need for a new product and came up with the Alternative Payment Plan.”
The mortgage offers the same terms of more traditional THF mortgages but adapts language and documentation to comply with cultural norms. Said Angela, “The loan will be open to everyone who fits the income or credit criteria. The only difference is that the loan eliminates language that is a barrier for some communities.”
In 2016, THF won a $100,000 Wells Fargo NEXT Seed Capital Award to implement its strategy to launch this innovative consumer finance product in Tennessee.
“As a CDFI, we play an important role in generating economic growth by investing in opportunities that transform lives and places for disinvested people. We make our economy stronger, one opportunity at a time, and with this expansion provided by the NEXT Award, THF will have the potential to finance more than $4.9M in loans and serve a minimum of 300 households,” said Joan Davis, Interim CEO of THF.
The Alternative Payment Plan is targeted to launch publically in spring 2017. Once the mortgage is on the market, THF will promote it through community and civic leaders, who, said Angela, “are really ready and eager for it.”
Since 1996, THF has loaned more than $83 million dollars for more than 5,500 housing units. This has leveraged more than $700 million in private financing. THF offers down payment assistance loans for low-to-moderate income homebuyers, provides short-term financing for the construction and/or rehabilitation of affordable housing, loans to create and preserve affordable artist live and work space, as well as a variety of other loan programs.