Brooklyn sees rapid growth in credit unions

October 2, 2012 By Tanay Warerkar For Brooklyn Daily Eagle
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`Brooklyn Coop’ has over 8,000 members

Erika Saleedo sits behind the clear glass wall at the Brooklyn Cooperative Federal Credit Union. A customer walks in and hands Saleedo a deposit.

In the course of the transaction, Saleedo inquires about the customer’s children and their new school. The customer grabs his receipt, shakes Saleedo’s hand, and starts walking out. “Have a nice day! “ says Saleedo. “And say hello to the kids.”

Forming intimate connections with the customers is one of the core tenets at the Brooklyn Coop, as it’s known. It was founded in Bushwick in 2001 before expanding to Bedford-Stuyvesant in 2006.

It is opening a much larger branch on Fulton Street and hopes to have it fully operational by the spring of 2013. A branch on Fulton will also place it in direct competition with established banks like Citibank and Bank of America.

Unlike those banks, credit unions such as Brooklyn Coop are non-profit organizations. They are funded and regulated by the National Credit Union Administration (NCUA), which was established in the 1970s.

“Credit unions were [historically] the reaction of working-class people against private banks,” said Richard D. Wolff, professor of economics emeritus at the University of Massachusetts Amherst. “Private banks served the interest of wealthy individuals and businessmen,” he added.

Things have changed since those days, but today, Brooklyn Coop is just one of the growing number of credit unions across the country.

An account holder in a credit union such as the Brooklyn Coop automatically becomes a member of the union, which as a whole — the board members and the customers of the bank — decides bank policy each year at the annual meeting.

“Credit unions are more conservative and careful with their finances,” said Wolff. “Membership is much more governed by the rules of transparency.”

At the end of 2011, membership in credit unions nationwide had reached 91.8 million, and their assets were worth $961.8 billion, according to the NCUA’s annual report.

This was up from 86 million members and just over $700 billion in assets at the end of 2007. Clearly, as the U.S. economy began to decline, many depositors sought new solutions.

Furthermore, in 2012 credit unions worldwide experienced 0.11 percent higher returns on their savings and 71.34 percent higher growth in assets compared to private banks, according to a study conducted by the Global Alliance for Banking on Values, an alliance of sustainable banks across the world.

The programs they provide also set credit unions aside from regular banks. Brooklyn Coop serves a community where almost half the population is dependent on public assistance. The Coop provides include foreclosure loans and free home ownership workshops, and it even offers to pay rent to the city Housing Authority on behalf of its members living in public housing, said Samira Rajan, the CEO of Brooklyn Coop.

One of the popular programs at the Coop is the Credit Builder loan – a program only offered by the Coop and one other financial institution in New York.

The Coop issues a promissory note to the customer in the particular amount that he or she desires. Customers have to pay back that amount in timely installments that they decide themselves.

Each payment towards the loan is reported directly to the Credit Bureau. And at the end of the process, the customer’s credit score is increased significantly.

“The classes [offered by the Coop], and the whole spirit of Brooklyn Cooperative, are to help many types of struggling families to reach a better place within our society,” said Chris Boston, a Coop customer.

The continued attention towards the needs of its customers is one of the reasons the Coop has grown rapidly. Since its establishment in 2006, the Coop has experienced an annual growth rate of 12 percent to 13 percent in assets. Its membership is currently over 8,000, and its assets have reached upwards of $10 million this year.

But it’s not just low-income residents who are attracted to the value-based structure of credit unions.

“After the financial crisis, particularly after 2010, commercial banks stopped offering free accounts, and everything changed,” said Kristen Euretig, a financial advisor at Brooklyn Cooperative. “Even middle-class customers don’t want to keep a $500 minimum, and pay $12 a month to keep a Chase account. Cooperative banking makes financial sense.”

And movements like Occupy Wall Street, with their hostility to large banks, are further increasing the popularity of credit unions. In just a few short weeks after the Occupy protests broke out in September 2011, Brooklyn Coop experienced a massive surge in membership.

“Just eight weeks after Occupy began, we had over 400 new accounts, and our assets increased by $1 million,” said Rajan.

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