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Sunday, March 16, 2008

Article in Palo Alto Daily News about East Palo Alto Credit Union Project

Here's a recent article about the credit union project. Our grand opening was yesterday - more updates to come...
First credit union shows signs of success
Plan aims at low-interest loans for East Palo Alto
By Banks Albach / Daily News Staff Writer

John Liotti has a vision for East Palo Alto, and it involves low-interest loans.

With the support and help of several community members, Liotti last December launched Community Trust Credit Union, the city's first credit union. He's hoping that a combination of cheaper car loans and mortgages, eventual small business financing and an alternative to the expensive check cashing outlets in the city will help locals save and succeed financially.

Liotti said the credit union can offer members car loans 5 to 10 percent lower than banks.

The credit union will celebrate its grand opening today.

"This community has been amazingly under-banked," Liotti said inside his credit union office on Bay Road. "Our goal is to move people out of the shadows of the financial world and away from predatory lending."

East Palo Alto, a 2 1/2-square-mile city with 31,000 people, has 14 check cashing outlets where residents can get fast cash at a steep price. Before the credit union, residents had only one bank in the city - California Bank and Trust, near Home Depot in the Ravenswood Shopping Center, which set up shop in 2001. Before that, financial institutions stayed away since an exodus in the 1980s amidst rising crime.

Throughout the years, some residents have looked into setting up a local credit union, to no avail, said the Rev. Paul Bains, whose brother owns the credit union's building.

"This is not the first time someone has tried in East Palo Alto, but it's the first time it's been successful," Bains said. "No one stayed the course."

With local roots and a growing number of local accounts - 140 already - Liotti is confident his credit union will succeed. Its manager, Maria Chavez, said she is steadily getting referrals from other members and has also been signing up people who have never banked before.

"We've had to show some people how to use an ATM," Chavez said.

Liotti, who also is president and CEO of Northern California Urban Development, said he first thought of opening a credit union around 2004 and made it happen through a large network of supporters and donors. The day-to-day operation of the credit union, for example, is being handled by the main office of Community Trust in Modesto. Liotti said he plans to support customers with financial advice and training through his nonprofit.

Community Trust, which has branches in Stockton and Riverbank, is classified as a community development financial institution by the federal government and thus eligible for special grants. Its president and CEO, Joe Duran, said it focuses on underserved communities.

"More than 50 percent of our members are classified as low-income," Duran said. "What we've discovered is that a lot of the traditional banks have moved away form these areas."

The initial $800,000 in financing for the East Palo Alto branch came from numerous sources, Liotti said. Menlo Park Presbyterian Church kicked in $50,000, and three larger credit unions - Addison Avenue, Stanford and Patelco - dedicated $300,000 total toward covering the branch's losses in its first three years. To jump-start its working capital, several credit unions around the country made zero-interest, three-year loans to the credit union.

"What we believe in is that East Palo Alto should have as many services as possible to be healthy and whole," said Larry Moody, director of local ministries for the Menlo Park church. "It wasn't a hard sell."

Liotti said he feels the credit union will break even after 19 months.

"A lot of people from outside the community said we couldn't do this," Liotti said. "We've surpassed our own expectations," Liotti said.

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