How far will you take financial inclusion for all?
Financial inclusion for all! It’s a goal that many credit unions aim to attain. The question becomes though, how do we accomplish that? This is often done via outreach with community partners, financial education, or new products and services. Whatever the avenue, reaching diverse communities can create both opportunities and challenges.
Recently, the Mexican American Legal Defense Fund filed lawsuits against credit unions alleging loans were wrongfully denied to DACA (Deferred Action for Childhood Arrivals) applicants, citing the credit union’s “Limited and arbitrary immigration-status requirements” as a reason for denial. The second lawsuit alleges that the credit union “unlawfully” denied a home equity loan to a DACA recipient as well.
While financial inclusion is imperative to drive upward financial movement for underserved communities–in this case, DACA recipients–it is also imperative that credit unions have sound, clear, processes and procedures that ensure credit union staff can deliver products and services in ways that do not cause unintended consequences or harm.
As we look at these lawsuits, we might wonder: Where is the balance in wanting to provide financial inclusion for all, and adhering to compliance with our policies? What I believe is important to take from this situation is not the fear of legal repercussions for helping DACA recipients with lending but rather, the importance of compliance, understanding DACA status, loan approval criteria, and continued training and education for staff.
The lawsuits indicate potential legal risks for credit unions related to lending practices, especially concerning applicants’ immigration status. Credit unions need to ensure their lending policies and practices comply with anti-discrimination laws and do not unlawfully exclude DACA recipients.
It is also essential for credit unions to understand the legal rights and limitations of DACA recipients. For instance, while DACA recipients do not have green cards, they are often issued work permits and social security numbers (not Individual Taxpayer Identification Number’s), which are used for financial transactions. The lawsuits suggest that using immigration status as a primary factor in loan decision-making, especially when it leads to the denial of loans to DACA recipients, can be legally risky. Credit unions need to review and potentially adjust their criteria to ensure they are not discriminatorily excluding certain groups.
What action should credit unions take when they consider fair lending practices? It comes down to continued staff training and education. Credit unions should invest in training and educating their staff about the rights of DACA recipients and the appropriate handling of loan applications to ensure compliance and fair treatment. This achieves two objectives: Compliance with lending policies and fair lending practices and, more significantly, financial inclusion for all.
Until recently, my wife was a DACA recipient. (I shared about this experience in this article.) During that time, we were fortunate to work closely with our credit union (that we chose because of their expertise in ITIN and DACA lending). Their expertise created trust with me and my family, as well as the rest of the growing membership that the credit union serves. This expertise also creates goodwill that other organizations simply do not have. It goes further than any marketing initiative. Now, my wife’s immigration status has changed. After nearly four decades of living in the United States, she is a legal permanent resident (green card recipient). Even though this removes obstacles from our path to full financial inclusion, it will not change our banking relationship. We will continue to work with the credit union who partnered to help us come this far, knowing that they will be there for us every step of the way.
Do your lending practices ensure the same loyalty from your members?
If you are curious how to help your credit union become more inclusive, Humanidei offers a variety of resources that may move you along your path.
