Southern Arizona’s biggest credit union will use a federal grant of nearly $1 million to boost lending among low-income and underserved groups in Tucson and in Arizona’s poorest counties — including offering alternatives to costly car-title loans.
Tucson-based Vantage West Credit Union was awarded $950,000 in fiscal 2018 financial-assistance funding from the U.S Treasury’s Community Development Financial Institutions Fund, which was created in 1994 to foster economic growth in underserved communities.
The only other Arizona recipients of the grants announced in mid-September were the Nonprofit Loan Fund of Tucson and Southern Arizona, which got $200,000 in financial assistance funding; and Housing Solutions of Northern Arizona Inc., which got $125,000 in technical assistance for equipment or services to help it build its lending capacity.
With its grant, Vantage West aims to give lower-income consumers — many of whom don’t have bank or credit-union accounts — access to fairly priced loans, said Richard Paige, director of market and product development for the credit union.
“We look at access to the financial markets as a continuum — you take someone from being ‘unbanked’ to participating in the local economy,” he said.
Many Vantage West members use existing personal lines of credit essentially for short-term loans, and the credit union’s research also shows hundreds of members have used costly options such as car-title loans, Paige said.
After a 10-year experiment, Arizona banned payday loans in 2010, but the state allows car-title loans that can carry annual interest rates of up to 180 percent.
“We think for the communities we serve, not only do we think we can do it better, but we think that’s our responsibility,” Paige said, adding that the new loan products will be rolled out in the coming months. “People need short-term consumer loans that are fairly priced.”
Vantage West applied in April for certification as a Community Development Financial Institution and the grant, Paige said.
In June, Vantage West won certification as one of more than 1,000 CDFIs nationwide, becoming the largest credit union in Arizona to receive this distinction.
Vantage West is Arizona’s third-largest credit union in terms of assets, with more than $1.9 billion in assets at the end of June.
The federal grant will be matched by Vantage West and used over three years for reserves backing new loans to the targeted communities, Paige said.
The credit union is working on a program to give fast approval for its existing unsecured consumer loans — which don’t require collateral and carry fixed annual interest rates of 9.75 to 26 percent, depending on the borrowers’ credit rating — as well as a short-term loan program.
Of the total grant, $250,000 will be directed to four rural counties that qualify as areas of “persistent poverty” because of their 20-percent-plus poverty rates: Apache, Graham, Navajo and Santa Cruz, Paige said.
Vantage West has members in each of the targeted rural counties and will work with local community organizations to market the loans where it has no branches, Paige said.