Concerned residents of the Twin Cities are organizing to create a new black-owned credit union, reported KARE Channel 11 News last week. If successful, it would join 348 credit unions in Minnesota including 18 in Minneapolis.
The group, known as Blexit, claims on its website that it first came together in the wake of the 2016 police killing of Philando Castile. Founded by Me’Lea Connelly, Blexit’s stated aim is to cultivate the practice of economic civil resistance. An affiliate organization, the Association for Black Economic Power, is home for the startup capital and administrative work that will usher the credit union into existence.
“In this neighborhood you practically can’t throw a rock without hitting a payday lender,” Connelly told KARE. “They are … extremely predatory. I say predatory because their target market is poor people. Black poor people, especially in north Minneapolis, are the last people that can afford to pay a 200 percent interest rate on a payday loan, and it puts people in extreme debt.”
In one 2015 lawsuit, Minnesota Attorney General Lori Swanson claimed one company had made 1,269 payday loans to borrowers whose applications indicated they resided in her state, and charged annual interest rates of up to 1,369 percent, “a figure that far exceeded Minnesota’s ceiling for fees and interest rates on payday loans.” The courts sided with the attorney general.
Low-income and marginalized populations have long employed credit unions as a strategy of community protection as well as community advancement. Blexit’s future credit union would be joining a list that includes institutions like Hope Federal Credit Union, Lower East Side People’s Federal Credit Union, and the Self-Help credit union family.
The Blexit credit union has yet to choose its own name. KARE reports the group has raised startup capital and is in the process of receiving its charter from the National Credit Union Administration (NCUA), but the ABEP website still has an open poll to name the credit union.
A new black-owned credit union would be a welcome addition to the shrinking roster of minority- and black-owned credit unions. Minority-owned credit unions fell from 651 in 2015 to 603 as of last year; black-owned credit unions fell from 323 to 301. Meanwhile, even as overall credit union membership continues to grow — breaking 100 million for the first time in 2014 — black credit union members represent just .78 percent of all credit union members, while majority black credit unions represent just .46 percent of all credit union assets according to NCUA data for 2016.
News may get worse for smaller or newer credit unions, especially those that serve underserved populations. Over the past year, NCUA has been working out a partnership with the U.S. Treasury’s Community Development Financial Institutions Fund to significantly streamline the process for credit unions to get certified as a CDFI, granting them access to financial and technical assistance grants that can help them grow and expand into new product lines. If President Donald Trump has his way, and the CDFI Fund budget for the next year gets cut to just $19 million, those grants will be gone.
Oscar is editor of Next City. Before that, he was a Next City contributing writer and 2015-2016 Equitable Cities Fellow. Since 2011, Oscar has covered community development finance, community banking, impact investing, equitable and inclusive economies, affordable housing, fair housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.