For former inmates, one credit union offers a path through parole
Some credit unions are taking “people helping people” to the next level in their push to grow membership.
In partnership with Shelby County Corrections, Southern Security Federal Credit Union is assisting with an inmate reentry program that helps consumers with prior criminal convictions get back on their feet. Now in its third year, the program includes a financial literacy component, a checking account and even assistance finding a place to live if necessary.
“We can guarantee that if they complete the program and attempt to gain employment, we will guarantee them a checking account,” said Dawn Graeter, CEO of the $169 million-asset credit union.
Working alongside HopeWorks, the Collierville, Tenn.-based credit union works with those who were previously incarcerated to help them understand financial concepts. But the 13-week program goes beyond financial education. Former inmates are taught how to build a resume, dress for an interview, restore credit and other basics of financial literacy.
Because HopeWorks is one of the credit union's SEGs, any inmate or parolee who participates in the program is eligible to become a member of Southern Security FCU.
The credit union works with Memphis-based Shelby County Corrections, which enrolls inmates in the program. In order to qualify, prisoners must be scheduled to enter parole within 24 months of starting the program. Behavior during incarceration is also examined as a criteria for acceptance.
Credit union membership rose by more than 30% between 2010 and 2019, but growth has slowed significantly in recent years. Year-over-year growth was just 3.2% as of October 2018, according to the most recent Credit Union Trends Report from CUNA Mutual Group. Two years prior that figure stood at 4%.
Parolees face a variety of problems when trying to assimilate back into everyday life. A significant percentage of the population struggles with mental health, learning disabilities, homelessness and poverty, according to Frederic Reamer, a professor at Rhode Island College who holds expertise on criminal justice and forensic social work.
One in three adults (75 million Americans) have a criminal record, according to the Trone Center for Justice & Equality. Research has shown that unemployment or unstable employment is the leading cause of recidivism. This particularly impacts minority and impoverished communities.
A study conducted by the Bureau of Justice Statistics examined over 400,000 prisoners released in 30 states over five years. The study found that by the end of the five-year period, over 75% of prisoners released in 2005 had been arrested again.
“There’s no one common profile,” Reamer said.
Southern Security FCU offers separate classes for men and women, with approximately 35 and 25 people enrolled in each, respectively.
The credit union also works with Hope2Hire, where inmates can learn vocational skills to help them gain employment upon release. Examples include a masonry program where interested individuals can learn brickwork, woodworking and a new culinary program where parolees can train to be a chef.
Select employers in these fields have an agreement with the credit union and other program participants that when full-time positions open up they will consider parolees on a 90-day interim basis. If everything goes well during that period, the position may convert to a regular full-time job.
That also helps with housing, which is also a struggle for former prisoners. The credit union aims to reduce recidivism by providing a short-term 90-day housing allowance that can be paid back via direct deposit once they are employed.
“The goal is to successfully have them re-enter society with a job, because that’s the biggest barrier, and then secure safe housing and transportation that they need to keep their job,” Graeter said.
Analysts said collaborations between financial institutions and correctional facilities are relatively uncommon but could pose many benefits.
"If the credit union industry can invest in this, this is a way to enhance public safety because programs like this go a long way in preventing crime,” noted Reamer. He suggested that state credit union leagues could work alongside state facilities to help promote inmate reentry programs. Part of the problem is lack of education, but he acknowledged that it’s well-known that inmate populations are considered high risk when it comes to financing.
Still, there are ways a credit union can protect its bottom line while participating in such programs.
Credit unions looking to mitigate risks can offer all-electronic accounts, which make it impossible for an individual to overdraw the account since the only way to access the account is through a debit card, noted Steve Reider, founder of Bancography. If a member attempts to withdraw an amount greater than the balance of their banking account, the transaction is rejected.
Secured cards can also help protect the credit union, he added. In order to obtain a $200 line of credit, a member would have to deposit $200 in a savings account or CD that they don't touch. If the member needs to default on the loan, then the credit union can take the difference out of the savings account.
"The credit union movement was founded to deliver financial services to a society lacking in such,” said Reider. "Credit unions that are going to enter low-income neighborhoods or in this case – at any point on the lower economic socioeconomic strata – will have more risk.”
This story was updated at 3:55 P.M. on Jan. 7, 2020.