Bank balking? Try a credit union
By Robbie Woliver • Bankrate.com

If your local bank won't give you that much-needed loan, and you feel they treat you like a number because you don't have lots of money to let them play with, and on top of that it feels like there's nowhere to turn, you might want to think about a credit union.

Teresa Duran, of Chacon, N.M., was a loan processor at the First National Bank in Las Vegas, N.M., earning $15,000 a year.

She didn't qualify for a loan at the bank that employed her because the bank's stringent requirements were too tight for the single woman, who commuted 100 miles to work every day.

Even though she was turned down by her bank because of a strict, faceless mathematical formula, the petite Duran was upset at the rejection. So she then tried her local credit union. They not only approved her loan, they gave her a new lease on life.

"When I applied for a loan from that bank to buy a reliable car so I could get to work, which was a very long distance from my home, they denied me," she angrily recalls. "And I worked for them! Giving people loans!"

Changing direction
Duran approached the credit union to which her parents belonged, the Rincones Presbyterian Credit Union, and was approved for a small loan. She used it to buy a car and establish her credit. Over the following years, she applied for several other loans, further building her credit and eventually buying her first home.

First National Bank president Don Kelly says he couldn't speak specifically about Duran's case.

"Our criteria were different from the credit union," he says. "We're two different businesses with two different guidelines."

Kelly recommends, when searching for a loan, "Keep trying at a bank, especially if you are a depositor."

Credit union leaders say a prime mission is to provide "character" loans, becoming a source of money for people who wouldn't qualify for a commercial bank loan. One key assumption is that a person's desire to repay is as important as repayment ability or income, they argue.

A struggling plumber who needs tools, an independent fisherman who needs boat repairs, or a father who glumly faces a mountain of children's hospital bills and can't meet a bank's qualifying criteria may have better luck at a credit union.

Banks cry foul
But bankers argue they are not the bad guys when it comes to the little guys.

"I don't necessarily think that credit unions are the friends of the low-income consumers. Things vary from institution to institution, and (Teresa Duran) might have gone to another bank that would have helped her, or perhaps another credit union which wouldn't have helped her," says Darrell McClendon, communications director for the Oklahoma Bankers Association.

"The idea that credit unions are the refuge of low- and moderate-income consumers is dubious. Unlike credit unions, banks are required under the Community Reinvestment Act to help meet the credit needs of low- and moderate-income individuals in their community. And the banking industry as a whole is dedicated to that task," says McClendon.

One of the arguments commercial banks have offered in arguing for tighter regulations for credit unions is a claim that credit unions will sometimes spend their money on lavish offices. But Duran's credit union, which serves Mora County, N.M., one of the most economically depressed areas in the country, does not have lavish digs. The office is in Duran's home.

The Rincones Presbyterian Credit Union typifies the type of credit union that assists people usually sidestepped by commercial banks, say the credit union leaders: people like Duran who need a financial break and would not necessarily get it from a traditional lending company.

Teresa takes over
After receiving her credit union loans, Teresa Duran began working for the RPCU, and in 1994, she set up its office in her modest, three-bedroom rural home, which proved more convenient for the impoverished locals than the prohibitive 50-miles-from-home commercial alternative, where they would only be shunned.

Duran, who is bilingual, now assists people like herself from her small office, a tiny renovated bedroom.

"They just come to my house. We've made it much easier for these underserved people to get money to pay for things that other people take for granted. Tools. A refrigerator. A car. Doctor bills. And they own the credit union.

"We distribute our profits in many ways -- like insurance, dividends and low interest rate loans to people who desperately need it."

The Rincones Presbyterian Credit Union was originally set up to serve the Presbyterian institutions in the northern section of New Mexico -- Mora, Taos, San Miguel, Rio Arriba and Colfax counties. Mora County, where the credit union is located, is ranked 48th in the state in per capita income. The county also has one of the highest unemployment rates in the United States. There are few economic advantages afforded the predominantly Hispanic, tri-cultural community; there is also a Native American population.

"The credit union represents the only access to financial services for these people," Duran says. "The closest financial institutions are too far for these people to travel. We wish to promote thrift among our members, create a source of fair and reasonable rates of interest, and provide an opportunity to improve the members' economic and social conditions.

"Getting that first loan gave me an opportunity to make something of myself. And now I'm in the position to do that for other people."

A better life
Duran cites the recent plight of a local middle-aged couple whose home burned down.

"They were retired, on disability, unemployed. Where were they going to get help? We were there for them, to give them the ability to better their lives. Credit unions give more people the opportunity to make something of their lives -- like I did."

Today, former bank loan processor Teresa Duran, who was a business major at the University of New Mexico, is the manager of a credit union with $1,003,000 in assets.

Robbie Woliver is a freelance writer based in New York
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-- Posted: March 1, 2000