Building Lending Opportunities through ITINPosted by Victor Corro on November 12, 2018 A credit union’s income is largely driven by its loan portfolio, and there is a unique opportunity for even greater loan growth available to institutions willing to go the extra mile in serving immigrant populations.  Individual Taxpayer Identification Number Application Not everyone who works in the U.S. is considered a citizen, yet all are required to pay taxes on their earnings. Workers who don’t qualify for Social Security numbers must satisfy their debt to the IRS by registering for Individual Tax Identification Numbers, better known as ITINs. More credit unions are starting to use ITINs to qualify borrowers for loans and other services, a move beneficial both to members and their institutions. This is especially true for credit unions serving Hispanic and other underserved markets, but it should be noted that ITINs are not only for Hispanics and recent immigrants. Many workers from Canada, India and other countries pay their U.S. taxes through their ITIN accounts. Done correctly, loans using ITINs as proof of income can open a new world of borrowers for participating institutions. This past month Coopera, in partnership with our sister company PolicyWorks, the Filene Research Institute and inclusiv (formerly the National Federation of Community Development Credit Unions) released the Implementation Guide: Individual Taxpayer Identification Number (ITIN) Lending. The 67-page publication, free to credit unions, offers a comprehensive, legally compliant approach to ITIN lending. The guide consolidates best practices, tools and resources for credit unions wanting to reach this largely untapped market of immigrant workers who need the ability to more fully participate in the economic growth and development necessary to make their lives financially secure. The guide evolved using testing results from the Filene Institute’s Reaching Minority Households Incubator, which measures products and service strategies for reaching financially underserved consumers. Coopera was a major collaborator in both the research study and implementation guide creation. This guide couldn’t have come at a better time. There is a very strong business case for providing personal and automobile loans to what is an often-overlooked population segment. As with other financial products provided to the Hispanic community, the word is likely to spread among its members, resulting in an increase in member applications along with the resulting loan growth. There also is an equally strong philosophical platform for ITIN lending. Providing members of this group greater financial stability and more active participation in the U.S. economy serves not only their needs but helps create a level of increased financial security that serves to further strengthen their community and society at large. Credit unions are committed to serving the underserved, and this may well be the most underserved community of all. Please feel free to contact any of us at Coopera for more information on ITIN lending and a copy of the guide. We are here to help. Leave a commentAn Unscoreable Consumer Could Become Your Next Great MemberPosted by Miriam De Dios Woodward on March 6, 2018
At the same time, acquiring new members is becoming increasingly difficult for credit unions. Competition and financial consumer expectations have never been more complex and fast-moving. What if there was a way for credit unions to avoid turning away “unscoreable” consumers for loans and other services? What if there was a way to welcome them without increasing a cooperative’s risk profile? No Credit Does Not Mean Bad Credit Just because a consumer is unscoreable by most traditional credit scoring models doesn’t mean he or she won’t be able to pay back a loan. Several alternative models available today can help a lender evaluate a consumer’s ability to repay. Below are some examples, along with the types of data they incorporate into their models: eCredable – Bills, such as rent, utilities, mobile phone, cable/satellite TV and insurance Cignifi – Mobile phone behavior data First Access – Prepaid mobile-phone payment histories TrustingSocial – Social, web and mobile data Kabbage – e-commerce histories from sites like Amazon Experian’s Emerging Credit Score – Internet and direct-marketing purchases, property and asset records and telecommunications and utility data TransUnion CreditVision Link – Property tax records and checking/debit account records LexisNexis RiskView – Residential stability, asset ownership, derogatory status, life-stage analysis One thing all these companies have in common: They’re using big data to create better outcomes for consumers and meaningful value for lenders. And credit unions have the opportunity to do so, as well. Alternative sources of consumer data, such as utility records, cell phone payments, medical payments, insurance payments, remittance receipts, direct deposit histories and more, can be used to build better risk models. Armed with this information – and with the proper programs in place to ensure compliance with regulatory requirements and privacy laws – credit unions can continue making responsible lending decisions while better serving the underserved. How One Organization Successfully Uses Alternative Credit Scoring Kinecta Federal Credit Union uses an alternative data score from LexisNexis known as Riskview to assess creditworthiness for traditionally unscoreable borrowers. The model factors in data from sources like utility bills, public records, address and employment stability, among many others alternative data elements. The result is a Fair Credit Reporting Act (FCRA) regulated score. By using nontraditional credit verification methods, Kinecta is able to approve more than 60 percent of the applications it receives. Since 2014, Kinecta has made about 20,000 loans for more than $30 million.” How Alternative Credit Scoring Fits the Credit Union Philosophy Credit unions exist to help people, not make a profit. Their goal is to serve all members well, including those of modest means – the very people most likely to be unscoreable by traditional credit scoring models. Many of these consumers fall into one or more of the following segments: • Unbanked/underbanked Alternative credit scoring provides credit access to consumers who may otherwise be turned down for a loan or forced to turn to a predatory lender. Using payment history and other data sources to evaluate a consumer’s creditworthiness is an excellent example of “people helping people” – one that benefits both consumers and credit unions alike. Leave a comment5 Trends Driving Credit Union Investment in Underserved MarketsPosted by Miriam De Dios Woodward on January 8, 2018
Here are some of the 2017 study’s highlights: • Underserved consumers spent $173 billion in fees and interest to use $1.94 trillion in financial services in 2016. • Spending by financially underserved consumers increased 6.6 percent, or $10.7 billion, in 2016. • The market has grown an average of four percent each year since 2009. The report also identifies five trends driving opportunities for financial services providers. What follows are a few ways credit unions may consider leveraging these trends to improve the financial lives of underserved consumers in their communities. Credit Cards How Credit Unions Can Help Frequent Overdrafts How Credit Unions Can Help Credit Pricing How Credit Unions Can Help Small Business Finance How Credit Unions Can Help Fintech Solutions How Credit Unions Can Help Clearly, there are many ways a credit union may be able to leverage the trends driving opportunities in underserved markets. Before embarking on a new initiative, however, a credit union should ensure the strategy aligns with its mission and target market. Doing it right requires a decent amount of work, and importantly, buy-in from executives and the board. But for credit unions looking to tap into the huge potential of the underserved opportunity and improve the financial lives of more consumers, it’s likely worth the effort. Leave a comment |
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