Employees at the Lower East Side People’s Federal Credit Union don’t care about filing extra compliance reports if it means predatory lenders are kept at bay.
“We really believe in the CFPB and Mulvaney is really trying to destroy it,” said Linda Levy, president and CEO of the $55 million-asset credit union in New York City.
While most credit union leaders celebrated President Trump’s appointment of interim director Mick Mulvaney, Levy was on a conference call with representatives from consumer groups talking about how the president’s interim appointment, which she considered unlawful, might negatively affect her members. The representatives suggested that she might have good standing to sue the president because her credit union is a regulated entity of the Consumer Financial Protection Bureau.
LESPFCU has a history of supporting the CFPB, with the chair of the CU's board, Deyanira Del Rio, testifying in 2012 about the agency’s impact on consumers.
A few days later, Levy introduced the idea of suing the Trump administration to her board in a strategic planning meeting. The whole board agreed with the legal action, and the credit union found a pro bono lawyer.
In December of last year, the credit union filed a lawsuit in a federal court in Manhattan arguing that Leandra English was the rightful director of the CFPB and that the president was throwing financial institutions into “regulatory chaos.”
When the suit was filed, members came to the credit union to thank Levy, she said.
None of the credit union's operations have changed under the CFPB except for increased compliance costs.
“What do credit unions have to fear?” Levy asked. “If they are doing what a credit union should do, then what do they care who regulates them?”
LESPFCU left the Credit Union National Association because of the trade group’s position toward the CFPB. “They are not representing me or my members,” Levy said.
Other low-income credit unions and the National Federation of Community Development Credit Unions have been “totally supportive” of LESPFCU’s suit, she added.
A credit union where banks wouldn’t tread
Since the credit union’s inception, it’s been challenging other financial institutions.
When Manufacturers Hanover Bank closed down its Lower East Side branch in 1984, it left a 100-square-block area with no financial institution. Community leaders wanted to start a bank, but found that the capital requirements were too high. In 1986, with the help of the Federation, the community founded LESPFCU, at Avenue B and 3rd East Street, to fill the void.
When the bank later tried to open a branch on Lexington Avenue, the credit union went to the Federal Reserve Board and argued that under the Community Reinvestment Act, the bank had not adequately served its community.
The credit union couldn’t stop the bank from building the branch, but it did win a settlement from the bank.
The credit union received the bank’s old branch for free, $150,000 to renovate the space and another $150,000 as a three-year nonmember deposit.
LESPFCU was also the financial institution that banked the Occupy Wall Street movement. The protestors did not want to bank with the institutions they were fighting.
“People were donating money to Occupy Wall Street, and they had no idea where to put it,” Levy said. “So they opened an account here.”
Not a banker
When Levy came to the credit union, the corner it was built on was infamous for being the place for selling drugs in the Lower East Side.
“There were more empty buildings, I think, than there were occupied buildings,” she said.
The windows and doors of the credit union were boarded up with plywood. When Levy came to work in the morning, she opened a padlock and moved the plywood doors open so that people could come in.
“I used to say, ‘You can tell that this credit union is really needed because who would come and put their money in a place that has plywood?’ ” she said.
Levy had no experience in finance before heading up the credit union, but she had experience in the food cooperative world.
“But they knew they weren’t going to get a banker,” Levy said. “So they figured the fact that I had experience in co-ops was enough.”
The “members first” credit union
Alicia Portada, director of communications and community engagement, still remembers the first board meetings she had with the credit union.
Portada and others at the credit union don’t make decisions based on meeting financial goals or even based on the latest trends. “Usually the conversation goes: The member said we need to do this,” she said.
The credit union’s new branch in Staten Island was built in October 2017, after members in that community reached out asking for a branch. In addition to the Staten Island branch and its main office, the credit union has an ATM branch on Avenue C in the Lower East Side and a branch in East Harlem.
Portada began helping members get their Individual Taxpayer Identification Numbers, the IRS number to file taxes for those who don’t have a Social Security number, after members that needed ITINS approached the credit union for tax preparation.
For LESPFCU’s main branch, the first and third of every month — the days that members receive federal benefits — is known around the credit union as “check day,” and the line of people cashing or depositing their checks runs right out the door.
“All staff works that day,” Levy said. And the credit union provides coffee and pastries as members wait in line.
The credit union does have an ATM machine, but even members with direct deposit sit in line to talk to a teller.
“In addition to being low income, our members are mostly immigrants,” Levy said. “So they may come from countries where it’s not so sure that your money is there and safe. They want to come in and physically deal with their money because they are not coming from a place that has the same kind of banking system.”
“What the rest of the world would be like”
More than 90 percent of LEPSFCU’s loans are to low-income people.
When the 2008 financial crisis hit, many of the credit union’s members lost their jobs and businesses. The credit union experienced higher delinquencies as a result and lost grant money.
“Because even if our institutions aren’t engaged in predatory lending, it doesn’t mean that our communities aren’t harmed by these broader problematic practices,” Del Rio said.
The credit union’s staff took a 10 percent pay cut across the board for a full year, and LEPSFCU initiated a hiring freeze.
“It is expensive to do all this compliance, and it’s a drag,” Levy said. “But if we didn’t have these regulations that we have to comply with I’m afraid to think about what the rest of the world would be like.”
The credit union filed a supplemental letter brief on the subject of standing on Jan. 19. The Department of Justice then presented a letter in response.
In the meantime, the credit union continues to advocate for its member’s rights.
“At the same time that we’re bringing the suit, we’re also involved in conversations and coalitions that are pushing for strong regulation in consumer protections in New York and in states around the country,” Del Rio said. “State regulators are realizing that the federal watchdog is now being weakened.”