Low-income credit unions show members how to tighten purse strings

The storefront office with its assorted donated furniture and secondhand adding machines hardly resembles a posh financial institution. the walls are decorated with a picture of football hero Johnny Unitas and a poster board with snapshots of neighborhood children.

But North Greenmount Federal Community Development Credit Union is an inviting place for its low-income, north central Baltimore neighbors. Behind the teller's window, a local resident and former teacher's aide cashes checks and takes deposits from her customers, most of whom she knows by name.

"See how much you've got. Aren't you proud of that?" she applauds a teen-age boy making a deposit. Many of the credit union members are learning to save money for the first time.

The Baltimore credit union is among the some 600 low-income groups forming the "community development credit union" movement nationwide. Behind it is the idea that while one family may have little money and no change of getting credit from a bank, a whole neighborhood can band together and gather thousands, sometimes millions, of dollars. And they can use that money to help each other.

Although these groups control only about $50 million of the nation's billions , they measure their success instead in the changed lives of individual customers. their aim, which sometimes takes on the fervor of a crusade, is to help low-income members learn to control their own lives and purse strings.

They point to success stories like Diane Wilson.

Not long ago Mrs. Wilson was afraid to go out the front door of her rented Baltimore home because she might meet a bill collector coming in. She dreaded answering the telephone, thinking the caller would be a creditor.

But now, for the first time since her husband died and left her with three children and a handful of bills 16 years ago, she is living within her modest salary. She says the North Greenmount Credit Union is the difference.

"They counsel you," she says, explaining that the credit union lent her enough to pay off all of her other loans. The catch was that she first had to agree to live by a budget. Out of her weekly paycheck from her clerical job, she keeps $50 for expenses. The rest goes to the credit union to repay her loan and build a special energy account so that when fuel bills mount this winter, she'll be able to pay them.

Today, she says, "I'm on top." She has a few hundred dollars in her energy account, her bills are paid on time, and she even had enough money to take a modest vacation last summer, her first in many years.

Most important, she says, "I've broken the credit habit," which she compares with an alcohol or drug addiction. When department stores sent out door-to-door salesmen carrying stacks of linens and blankets, as is typical in low-income areas, the temptation was once too great, she recalls.

"You don't have the niceties," she says. "There's a sick excitement.You think, 'Boy, I've fooled them. Look what I've gotten, and I haven't paid a thing.'"

Then the bills came, and the late charges, and soon the late charges were greater than the item cost in the first place.

Now she closes the door on the salesmen.

She admits "there are weeks when I resent having to take them [the credit union] the money." But she does it anyway, she says, because otherwise "I'd be letting the community down." Besides, in two years she will be out of debt entirely, and she's already planing a celebration.

War smith, manager of Baltimore's North Greenmount Credit Union, says, "We've made loans to people with terrible credit ratings." He adds that a federal auditor who examined the loan portfolio called it a "blueprint for bankruptcy in one year."

Despite the gloomy forecast, the credit union, now operating for almost 1 1/2 years, has $300,000 in deposits and less than 1 percent delinquency in its loans. And recently the federal Community Services Administration (CSA) picked the North Greenmount Credit Union among 33 others to receive low-interest loans of $100,000 to $200,000.

The key so far, according to Mr. Smith, is giving credit only to those people who are willing to take control of their own finances. "The purpose is not to open up massive credit, but to use money as an educational tool to help poor people get out of the repressive cycle." The credit union members learn to move away from expecting welfare agencies to help them and start helping themselves, according to the manager.

"The whole organization is an education," says Steve Schanback of the National Center for Urban Ethnic Affairs which has recently received a $200,000 grant from CSA to assist groups like North Greenmouth. The credit unions are started by volunteers within the low-income communities and "for the first time they learn what it means to be on a board of directors" and how money can be reinvested within the neighborhood, he says.

Mr. Schanback agrees that community development credit unions also can fail. During the 1960s, the war on poverty poured thousands of dollars into such groups. When the federal money dried up, so did more than half of the credit unions.

But the credit union movement has learned some lessons from the failures, he says, so that the new ones, like North Greenmount, operate on a more businesslike basis. The new federal money, for example, is in the form of loans that must be repaid.

Still, it is difficult for these small credit unions to survive. One of the oldest, Union Settlement Federal Credit Union in East Harlem in New York City,. expects to be operating on its own next June, following 23 years of financial support from Union Settlement House, its parent social agency. It has $1.7 million in assets, which may be a minimum for running a self-sufficient credit union.

"You're not in business to make a profit, but you're in business to bring in enough money to keep in business," says Jim Clark, head of the National Federation of Community Development Credit Unions.

Mr. Clark says that he hopes new interest in low-income credit unions will cause the credit union industry to look back to its roots --loans and organized their own credit unions.