By Erick Johnson, Chicago Crusader
It’s being called the deal of a lifetime. For $10, you can be part owner of Seaway a Division of Self Help Credit Union. That’s right. The transaction takes about 15 minutes. It’s simple. All you need to do is open a checking or savings account and pay the $5 new membership fee. Sign on the dotted line, give a handshake and Seaway is yours along with some 12,000 other customers.
It’s one of several cooperative benefits that the new leadership at the former Seaway Bank and Trust Company is promoting to boost interest in a credit union that was once Chicago’s largest Black-owned bank.
With big banks still facing criticism after the Great Recession and more recently, the predatory lending scandal rocking Wells Fargo, non-profit credit unions are experiencing renewed interest. With big aspirations, customers are turning to credit unions after years of being fed up with loan rejections and high fees from the traditional big banks.
According to the National Credit Union Administration, the U.S. independent federal agency that supervises and charters federal credit unions, there are currently 5,737 credit unions operating in the U.S. Altogether they have over one trillion in assets. It’s nearly a 20 percent increase from 2008, when some 90 million members had deposits in the nation’s credit unions.
But with few credit unions in the Black community, educating and reeling in new customers may be challenging. However, with Seaway’s prominent name and strong bond to Chicago’s Black community, Al Bass, Seaway’s new president, believes the combination can yield big returns for the customer, and for Seaway’s future.
Bass is part of an ambitious effort as Seaway ushers in a new chapter in the institution’s 52-year history. With widespread discontent and distrust spreading about the big banks, Bass and Chief Retail Banking Officer Daryl Newell, have launched a campaign to educate and lure new customers. Seaway, a Division of Self Help Credit Union will, like most credit unions, offer customers a unique opportunity to be a cooperative owner of a prominent institution.
“It’s always been difficult to start in a market without name recognition,” Bass said. “We view the Seaway name as a benefit. I think we bring to the table a strong financial institution. We feel like we’re able to take a risk more than the old Seaway could.”
Founded in 1965, Seaway was Chicago’s largest Black-owned bank that helped many Blacks in Chatham and other minority neighborhoods start businesses and purchase homes at a time when banks were reluctant to grant loans to people of color. Seaway was hit hard from the Great Recession and its problems increased after its founder, Jacoby Dickens, died in 2014. In January, federal regulators closed Seaway after it failed to improve its finances under a consent order in 2014.
When it closed, Seaway had $361.11 million in total assets and $307.12 million in total deposits. The State Bank of Texas took over Seaway’s loan division. But Self Help FCU, a national network of credit unions in working-class communities that has lent over $7 billion in loans to more than 129,000 customers took over Seaway Bank’s 12,000 customer deposit accounts and its seven Chicago branches, including Seaway’s flagship location at 645 East 87th Street in Chatham. The move came after concerns that Chicago would lose another historic institution, that for decades served underserved neighborhoods often shunned by big banks.
Self-Help has experience in the Chicago market. In 2013 the non-profit took over Second Federal Savings & Loan’s three branches that failed in 2012 with $120 million in assets.
Since acquiring Seaway Bank’s depositors, the new president of Seaway a Division of Self Help Credit Union, Al Bass, and Chief Retail Banking Officer Daryl Newell, have been on a campaign to reinvent Seaway as a viable credit union with bigger goals and easier lending policies than most banks. But the first order of business is educating underserved neighborhoods about credit unions.
Unlike banks, credit unions are owned by their customers, (known as members), rather than shareholders. This means credit unions don’t have to pay dividends and profits go back into programs and services that help customers.
Loans are easier to obtain from credit unions, which take on higher loan risks from borrowers with less than perfect credit ratings. As a non-profit, credit unions rely on federal insurance to avoid the high cost of funding, and there is no pressure from stockholders to boost profits.
Banks were the target of widespread anger after they were blamed for the massive housing crisis that triggered the Great Recession in 2008. Most of them were sued by cities whose Black neighborhoods had the highest foreclosure rates among ethnic groups. During this time, credit unions gained increased popularity because they were non-profit organizations not controlled by Wall Street or lead by profit hungry executives.
To Bass, it’s the most ideal formula for Seaway’s success as a credit union. Bass and Newell are focusing primarily on existing and new deposits right now, but there are plans to expand into lending mortgages and other loans. Bass said Seaway as a credit union will consider applicants with FICO scores as low as 580.
Newell said the minimum amount needed to open a savings account at Seaway a Division of Self Help Credit Union is $5. He said there is no minimum requirement to open a checking account, but a $5 new membership fee is assessed when any account is opened. Compared to banks, that amount is still an excellent deal to customers.
“It’s more of a benefit than a bank from the standpoint of the customer,” according to Bass.
To boost interest and customers, Bass said Seaway plans to hold seminars and forums on credit unions.
Nationwide, membership in credit unions has risen over the years. After Bank of America, JP Morgan, and Citibank were accused of reaping big profits from granting subprime mortgages to Blacks and minorities, some 650,000 people became new credit union customers during a nationwide protest called Bank Transfer Day in November 2011.
The event capped a period of decline among big banks.
According to the Federal Deposit Insurance Corporation (FDIC), in 2008, the rate of commercial bank failures was almost triple that of credit unions. That increased to almost five times the credit union rate in 2010.
Bass said during the recession, Self Help Credit Union saved 95 percent of the mortgages through remediation and modification. He said those mortgages are successful and active today.
“We’re happy it won’t be a challenge. The Black community will embrace Self-Help. So far there’s been a lot of confusion, but folks will see that we are here to stay when they see our commitment.”