First-generation immigrants Francisco and Imelda Zuñiga needed help after medical costs and their daughter’s college tuition wiped out their savings and left them with significant debt.

They found it at $311 million asset Freedom First Federal Credit Union in Roanoke, Va.

The couple worked with the credit union’s financial educator to assess their situation and assist with budgeting.

“We could not get student loans for our daughter’s college tuition, and we fell behind in other payments, mostly medical bills,” says Francisco Zuñiga.

A big concern was Francisco’s credit score, which was only 500 despite being a small-business owner and leader in their church.

Freedom First Federal—a member of the National Federation of Community Development Credit Unions— worked with the couple to improve their credit via financial education, credit counseling, and regular payments on a loan designed to build credit.

In about a year, Francisco’s credit score was up to 640 and the couple made other improvements to their financial situation. They eventually moved into a new home purchased with down-payment assistance and a loan from Freedom First Federal.

“We trust Freedom First,” Francisco says.

Relevant reinvention

It’s a story that might not have been told, had it not been for a major strategic pivot by Freedom First Federal about five years ago. That was when the credit union’s leadership team took a step back, looked around, and saw their members and communities in need.

Many members had low incomes and lacked access to reliable transportation and affordable housing. Many nonmembers in the community were unbanked or underbanked and at risk from predatory lenders.

To serve this population, the leadership team realized it had to make some changes. “We said, ‘Let’s be different,’” recalls President/CEO Paul Phillips.

Under Phillips’ leadership, the credit union embraced the mission and vision of community development credit unions. “In doing so, we’ve breathed new life into the credit union. It gave us all a greater sense of purpose,” he says.

In addition to being a member of the National Federation of Community Development Credit Unions, Freedom First Federal sought and received a “low-income credit union” designation from NCUA and a “community development financial institution” (CDFI) designation from the Treasury Department in 2010.

These designations and connections gave the credit union access to capital and technical assistance. This helped the credit union obtain grants, develop new products, and collaborate with community partners. The credit union has also reassigned more staff to meeting the needs of its community.

“Freedom First has done a remarkable job of creating a development strategy that’s sustainable, relevant, and successful,” says Pablo DeFilippi, the Federation’s director of membership.

Relevant programs

The credit union offers specialized programs, products, and services with its members’ best interests and needs in mind. One such program is Responsible Rides, which incorporates financial education and vehicle-maintenance classes to help borrowers purchase and maintain reliable transportation.

Retirees Augustine and Christine Vergies have benefitted from the program. Before working with Freedom First Federal, the couple relied on family and friends to take them shopping or to the medical clinic. The Vergies couldn’t qualify for a loan at a reasonable interest rate because they lived on a fixed income.

“The car has given us independence,” Christine says.

Other Freedom First Federal programs and products specifically seek out unbanked and underbanked consumers—almost a quarter of the households in the credit union’s service area. These include:

►Borrow and Save Loans—a partially secured, 12- to 36-month loan that makes a portion of the loan proceeds available upon approval and places the remainder in a locked savings account to be released at maturity.

This gives borrowers an opportunity to build good savings habits by repaying the loan before the second portion is available. When the loan is successfully repaid, the credit union invites the borrower to invest some or all of the funds in a certificate of deposit with a preferred interest rate, which makes additional funds available for unexpected needs.

►Credit-builder loans—small loans that work in reverse to help borrowers build credit. The loan proceeds are placed in a secure account while the borrower makes regular payments. When fully repaid, the borrower receives the loan proceeds.

By establishing positive payment histories, borrowers can improve their credit scores in a relatively short time and qualify for lower interest rates.

►Individual development accounts—matching savings plans for low-income individuals who want to save for homes, start businesses, or pay for their education. Program participants receive financial counseling.

►Micro loans—unsecured loans of up to $3,000. They don’t generate big profits, but they have a big impact.

►Payday alternative loans—options for consumers to avoid the cycle of debt that can be caused by payday lenders. These loans save borrowers money and they introduce borrowers to the benefits of credit union membership.

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