Coastal Cash

A Concept Report on Providing an

Alternative to Payday Lending &

Check Cashing in Grays Harbor

and Pacific Counties

July 2008

Coastal Cash

A Concept Report on Providing an Alternative to

Payday Lending and Check Cashing in Grays Harbor

and Pacific Counties

Concept Prepared by

R. Troy Colley, Executive Director

Craig Dublanko, Finance Officer

Shawna Myers, Supported Employment Consultant

Coastal Community Action Program

and

James A. Boora, Board of Trustees

Anchor Bank

Report Prepared by

John M. Kliem

Deborah A. Holden

Creative Community Solutions

July 2008

This report was made possible by a grant through the

Washington State Community Action Partnership

Executive Summary

Payday lending is a significant threat to the stability of low-income families and

individuals in Grays Harbor and Pacific Counties. Unfortunately by using these

services, many citizens enter into a never-ending cycle of high fee based loans

at enormous annual interest rates.

Other alternative financing practices, including check cashing, pawnshops, and

rent-to-own businesses, also drain their financial resources.

Nationally, there are efforts moving forward at providing affordable choices to

payday lending and other alternative financial practices. These include

legislative action, credit unions, Community Development Financial Institutions,

and financial intermediaries. The Coastal Community Action Program and

Anchor Bank intend to add upon these alternatives by creating a payday loan

alternative appropriate to Grays Harbor and Pacific Counties – Coastal Cash.

This report explores how the Coastal Cash concept, acting as a financial

intermediary between low-income people and local financial institutions, will

provide traditional banking services to unbanked low-income people in a

nontraditional banking environment. Coastal Cash will:

Connect unbanked people with local financial institutions through

specialized programs

Assist in obtaining no minimum fee checking accounts

Provide affordable fee structures for small loans

Deliver free payroll and government check cashing services

Promote financial education to build financial self security

The report also contains a work plan for moving toward the next step – creating

a business plan that includes commitment by financial institutions and

community partners.

i

CONTENTS

Overview Payday Loans and Their Impacts ............................................................................. 3

The Payday Loan Process ........................................................................................................ 1

Impacts of Payday Loans ........................................................................................................ 2

Payday Loans in Washington State ....................................................................................... 3

Payday Loans in Grays Harbor County ................................................................................. 4

Other Alternative Financial Service Providers ...................................................................... 5

Alternatives to Payday Loans ..................................................................................................... 7

Legislative Action ..................................................................................................................... 7

Credit Unions ............................................................................................................................. 8

Community Development Financial Institutions................................................................. 10

Financial Intermediaries ......................................................................................................... 10

The Coastal Cash Concept ...................................................................................................... 12

Working with Customers ........................................................................................................ 13

Banking Services Available ................................................................................................... 14

Recommended Locations .................................................................................................... 15

Money Management Education ......................................................................................... 15

Financial Institutions and Community Partners ................................................................... 16

Financial Institutions ................................................................................................................ 16

Community Partners ............................................................................................................... 18

Funding Coastal Cash ........................................................................................................... 18

Applicability of State Financial Institution Laws to Coastal Cash .................................... 19

Next Steps: Coastal Cash Business Plan .................................................................................. 21

Appendix ―A‖ .............................................................................................................................. 22

Comparison of TULIP Cooperative Credit Union & Bank on San Francisco ....................... 22

Appendix ―B‖ .............................................................................................................................. 25

Model: Prosperity Credit Union ............................................................................................ 25

Appendix ―C‖ .............................................................................................................................. 28

Payday Loan Comparisons ....................................................................................................... 28

Appendix ―D‖ .............................................................................................................................. 30

Funding Research ....................................................................................................................... 30

Appendix ―E‖ ............................................................................................................................... 34

Research Resources ................................................................................................................... 34

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TABLES

Table 1: Payday Loan Offices in Grays Harbor County .......................................................... 4

Table 2: Comparison of Alternative Loan Providers at a Glance .......................................... 6

Table 3: General Description of TULIP LICU and Bank on San Francisco ............................ 22

Table 4: Summary of Basic Services for TULIP CCU and Bank on San Francisco ............... 22

Table 5: Hours for TULIP CCU and Bank on San Francisco .................................................... 22

Table 6: Identification Requirements of TULIP CCU and Bank on San Francisco .............. 23

Table 7: Fees for Services at TULIP CCU and Bank on San Francisco .................................. 23

Table 8: Sponsors and Partners for TULIP CCU and Bank on San Francisco ....................... 24

Table 9: Timeline for Prosperity Credit Union (PCU) and Prosperity & Communities

Together (PACT): ......................................................................................................................... 26

Table 10: Payday Loan Companies in Aberdeen/Hoquiam Area and Online ................. 28

INDEX OF CITATIONS / LINKS

2006 Payday Lending Report ...................................................................................................... 3

53.com/wps/portal/personal ................................................................................................... 31

A Drain on Our Neighborhoods: Payday Lending in Washington State ............................... 5

Anchor Bank ................................................................................................................................ 17

ATT.com/gen/corporate-citizenship?pid=7745 .................................................................... 30

Bankofamerica.com/foundation/index.cfm?template=fd_localgrantmaking ............... 30

Bank on San Francisco ............................................................................................................... 10

Budgetandpolicy.org/documents/highinterest.pdf ............................................................. 36

CFED.org/institute/rg/05_rg_predatorylending.pdf ............................................................... 34

CFED.org/institute/rg/09_rg_stateCDFI.pdf ............................................................................ 34

Community Reinvestment Act.................................................................................................. 17

Consumerlaw.org/initiatives/osi/miscellaneous/wire_transfer.shtml ..................................... 5

Consumer-action.org/moneywise_program_awards_financial_education_grants/ ...... 32

EFAW.org/Inquiry%20Guidelines.htm ...................................................................................... 30

iii

Fanniemaefoundation.org/programs/pdf/fscs_Case_Studies_Intro.pdf .......................... 34

Foundationcenter.org/cleveland/gitn/cl_gitn_030103.html ............................................... 34

FTC.gov/bcp/edu/pubs/consumer/alerts/alt060.shtm ........................................................ 34

Home3.americanexpress.com/corp/gb/howto.asp ........................................................... 30

HSBCUSA.com/ourcompany/pressroom/2006/news_052406_1_million_grant.html ........ 31

HUD.gov/offices/hsg/sfh/hcc/hccprof14.cfm ...................................................................... 30

Key.com/html/A-12.3.html ....................................................................................................... 31

Lendingclub.com/info .............................................................................................................. 35

Lowes.com/lowes2/AboutLowes/careers/careers_diversity_fair.html .............................. 31

Medinafoundation.org/index.php?p=Grants&s=3 ............................................................... 32

Money Smart ............................................................................................................................... 15

NCUA.gov/Credituniondevelopment/Programs/FinanceGrants.htm .............................. 32

NCUF.coop/?sectionpath=1/105/106&pageid=552 .............................................................. 8

NEFE.org/tabid/81/Default.aspx .............................................................................................. 32

Neighborhood Excellence Initiative ........................................................................................ 30

Nextawards.org/ ........................................................................................................................ 33

OCC.treas.gov/cdd/cdresourcedir.htm ................................................................................ 35

Opportunityfinance.net/about/about.aspx ......................................................................... 36

RCW 19.34.010(2)(a) ................................................................................................................... 20

RCW 19.134 .................................................................................................................................. 19

RCW 31.04 .................................................................................................................................... 19

RCW 31.45 ...................................................................................................................................... 3

Springing the Debt Trap ............................................................................................................... 2

Sterlingsavingsbank.com/about/community/about_comm_cra_grant.aspx ................. 32

Svermillion@firstnations.org ....................................................................................................... 31

Tdbanknorth.com ...................................................................................................................... 33

Thinking of a Payday Loan? ........................................................................................................ 3

TULIP (Thurston Union of Low Income People) Cooperative Credit Union ........................... 9

US Department of Treasury Community Development Financial Institutions Fund ........... 10

WAC 208-620 ............................................................................................................................... 19

WAC 208-620-240 ........................................................................................................................ 20

iv

WAC 208-620-260 ........................................................................................................................ 20

WAC 208-630 ................................................................................................................................. 3

WAMU.com/about/community/programspartnerships/default.asp .......................... 33, 36

WAWB.uscourts.gov/ ................................................................................................................... 5

Wellsfargo.com/about/charitable ......................................................................................... 33

1

Overview Payday Loans and Their Impacts

The Payday Loan Process

Payday loan companies play a major role in Grays Harbor County’s financial

industry. These companies, also called ―cash advance loans,‖ ―check advance

loans,‖ or ―deferred-deposit check loans,‖ offer to customers small, short-term

high interest loans. Marketed to low- and moderate-income customers, these

loans are a quick and easy solution for borrowing money for small, unexpected

expenses.

The process of obtaining a payday loan is relatively simple. A borrower gives the

lender a post-dated check or an automated clearinghouse authorization for the

loan amount plus a transaction fee. Some companies will use other real-

property as collateral, such as cars or homes, when the owner has clear title to

them. Lenders require little information from the borrower, often just personal

identification, a checking account number, and proof of income from a job or

government benefits.

Once the lender receives the check, there is a promise not to cash the check

for a given period, usually associated with the borrower’s next payday. If the

borrower has the money to pay back the loan by the due date, that person can

redeem the check in cash or let the lender simply cash the check.

If the borrower lacks sufficient funds to cover the loan and transaction fee, he or

she can extend the loan for a similar term simply by paying the transaction fee

again. When a borrower relies on frequent renewals, the cost of the transaction

fee can often outstrip the original amount borrowed.

2

Payday loan companies have proven popular nationwide by targeting

customers who are:

Young with limited understanding of finance

Deeply in debt

Struggling to meet their day-to-day financial obligations

Uncomfortable with using banks and credit unions

Use to relying on high risk lenders

Payday lending is a lucrative business. Nationwide, payday lenders earn $1.6 to

$2.2 billion in fees on a loan volume of $10.0 to $13.8 billion.

Impacts of Payday Loans

The biggest problem associated with payday lending is that most short-term

loans typically become long-term debt for many customers. The trap that

captures the borrower is the high price of the transaction fee and the

requirement to pay it off within a short time frame, which is usually two to three

weeks.

Many customers who rely on payday services are not financially sound. In fact,

the Center for Financial Responsibility reported that only 2% of borrowers are

capable of paying off the loan plus transaction fee in two weeks or less.1 More

often, several, if not many loan terms come due before most customers are in a

position to pay off a loan through their own means or refinancing through

another type of loan. The inability to repay a payday loan immediately forces

the borrower to pay substantial transaction fees that translates into exorbitant

interest rates that typically range from 350 to 500 percent. This further reduces

their financial assets, which in turn pressures them to take on additional loans to

make ends meet.

1 Springing the Debt Trap, Center for Responsible Lending, December 2007.

3

Payday Loans in Washington State

The Washington Department of Financial Institutions (DFI) regulates payday loan

companies in Washington State under Chapter 31.45 of the Revised Code of

Washington (RCW). Chapter 208-630 of the Washington Administrative Code

(WAC) provides specific regulations for implementing the Code. Together, the

RCWs and WACs provide the framework for payday company operations in the

state.

In a nutshell, the RCW and WAC limits payday loans to a

45-day term

Maximum loan amount of $700

Maximum loan fee of 15% for the first $500, 10% for amounts over $5002

Customers also have the right to a payment plan after four successive loans with

the same company.

In 2006, the Washington Department of Financial Institutions reported that the

average payday loan in the state was $379.81 and the average loan fee was

$53.32. Payday companies earned $187 million in loan fees on a loan volume of

$1.3 billion. In a survey of 55 companies operating in Washington, DFI found that

the average length for the vast majority of all payday loans was 8-14 days

(41.6%) and 15-21 days (34.6%). Slightly more than 86% of payday customers

used the service five or more times in a year. Only 8.22% of the borrowers in the

survey ever entered into a payment plan.3

2 For example, a 14-day, $500 payday loan with the maximum fee permitted by statute would

have an APR of 391.07%. Thinking of a Payday Loan? Washington Department of Financial

Institutions. 3 2006 Payday Lending Report, Washington State Department of Financial Institutions.

4

Payday Loans in Grays Harbor County

Currently there are 12 licensed payday offices operating in four cities of the

county.

Table 1: Payday Loan Offices in Grays Harbor County

City Type Company Name Trade Name / Issuer Name

Aberdeen Small Loan MHB Rent to Own Inc ColorTyme

Aberdeen Small Loan (Branch) Advance Cash LLC Advance Cash

Aberdeen Small Loan Richardson Claudia L Loan Star Payday Loans

Aberdeen Small Loan (Branch) Woodard Bay Financial

Services Inc

Paycheck Financial Centers

Aberdeen Small Loan (Branch) Advance America Cash

Advance Centers of WA LLC

Advance America & Advance

America Cash Advance Centers

Aberdeen Small Loan (Branch) WCS Loans Inc Advance Til Payday

Aberdeen Small Loan (Branch) Rent-A-Center West, Inc. Cash AdvantEdge

Aberdeen Small Loan (Branch) ACE Cash Express Inc

Elma Small Loan BRV Enterprises LLC Elma Pay Day Loans

Hoquiam Small Loan Loan Zone Inc, The

Hoquiam Small Loan (Branch) QC Financial Services Inc Quik Cash; QC Holdings

Montesano Small Loan (Branch) Loan Star Payday Loans LLC

Source: Washington Department of Financial Institutions Licensee Database, July 2008

Demographically, customer’s in Grays Harbor County fit the conventional

payday user profile. Aberdeen and Hoquiam, the commercial and population

centers of the county, have the largest number of payday loan offices. This is no

coincidence - both communities have the largest concentration of low- and

moderate-income households as well as the highest proportion of nonwhite

Hispanics, Native American, and Asian-Americans within the county.

Nearly 44% of county households qualify as low- and moderate-income.4 The

county’s annual average wage was $30,624 compared to the statewide

4 2000 HUD Special Census, Community Development Block Grant Program

5

average of $40,704 (2007).5 Grays Harbor County consistently ranks as having

one of the highest unemployment rates in the state, falling only behind Ferry

County in 2007 at 7.1%.6 Grays Harbor County residents ranked highest in 2006

for the number of Chapter 7 bankruptcy filings per thousand within the

jurisdiction of the Western Washington US Bankruptcy Court.7 A report regarding

payday loans in King and Pierce Counties commissioned by ACORN found

similar trends within their urban neighborhoods.8

Other Alternative Financial Service Providers

In addition to payday loans, other alternative financial service providers include

check cashers, pawnshops, rent-to-own shops, and auto title lenders.

Across the nation, check cashers actually conduct the largest dollar

transactions of all alternative financial service providers. For government and

payroll checks, a customer will pay a fee of around two to three percent.

Individuals cashing a personal check will pay about 15 percent of the total

amount. Many check cashers also engage in other financial transactions, such

as money orders wiring money to foreign countries.9

Like payday lenders, pawnshops, rent to own stores, and auto title lenders

provide customers with relatively small, short-term loans with at high fees,

including rollover fees.

5 Grays Harbor County Profile, May 2007, Labor Market & Economic Analysis, Washington State

Employment Security Department. 6 7007 Annual Average Washington state Resident Civilian Labor Force and Employment, Labor

Market and Economic Analysis, Washington State Employment Security Department. 7 http://www.wawb.uscourts.gov/ Grays Harbor County had a bankruptcy rate of 1.84 per

thousand, while the sum of Western Washington counties experienced a rate of 1.14/1,000. 8 A Drain on Our Neighborhoods: Payday Lending in Washington State, Association of

Community Organizations for Reform Now (ACORN), November 2006. 9 Illegal immigrants often pay exorbitant fees of 10 to 25 percent of the total remittance; wire

fraud is common. http://www.consumerlaw.org/initiatives/osi/miscellaneous/wire_transfer.shtml

6

Table 2: Comparison of Alternative Loan Providers at a Glance

Type of

Alternative

Provider

Service Provided Fees/Rate Per

Transaction

Volume of

Transactions

Nationwide

Total Estimated

Fees

Nationwide

Check

Casher

Cashes checks, including payroll,

personal, and government

checks, for a per-check fee.

Many check cashers also sell

money orders and other money

transmittals.

2% to 3% of check

amount for payroll and

government checks; as

high as 15% for personal

checks.

$60.0 billion $1.5 billion

Payday

Lender

Small cash advances, usually

between $100 and $300, based

on personal checks held by the

lender for a scheduled period of

time, usually two weeks. Where

allowed by state law, many

check-cashing outlets offer

payday loans. Because payday

loans are originated with a

personal check as collateral,

borrowers must have a bank

account, steady job, and no

history of writing bad checks.

15% to 17% fee for a

two-week loan. If the

loan is rolled over, this

creates an effective

APR of 400% or more.

$10.0–$13.8

billion

$1.6–$2.2 billion

Pawnshop Loan issued with pledged

collateral. The average loan is

around $70, which represents

roughly 50 percent of the

collateral’s resale value.

1.5% to 25% monthly,

which is 30 to 300% APR.

$3.3 billion Not available

Rent-to-Own

Shop

Consumer goods provided

through installment payments.

Effective prices 2 to 3

times retail.

$4.7 billion $2.35 billion

Auto Title

Lender

Single-payment loans provided,

usually with 30-day terms, which

are secured by an auto title.

Typical loan is for 25% of the

collateral value.

1.5% to 25% monthly,

which is 30 to 300% APR.

Not available Not available

Source: Alternative Financial Service Providers, Fannie Mae Foundation

7

Alternatives to Payday Loans

The problems created by payday loans nationwide have underscored the need

to find equitable credit options, especially for financially vulnerable low- and

moderate-income people. There have been several public and non-profit

approaches to countering their impacts.

Legislative Action

On the forefront has been the effort by states to legislate limitations on payday

loan practices. These laws often focus on:

Renewal bans and cooling-off periods that prevent loans from being

continuously rolled over

Limits on the number of loans a customer can have at any one time

Requirements to offer the opportunity to convert payday loans to

payment plans after a specified number of loan renewals

Loan caps based on the borrower’s income

Establishing reporting databases that track and enforce loan limitation

provisions

Narrowly defining payday loan terms and conditions

Banning payday loans altogether (Georgia)

Enforcing an interest rate cap10

The Center for Financial Responsibility reports that payday loan companies,

however, have proven adept at finding loopholes to these laws by quickly

restructuring their loan products or sidestepping state regulators by using the

10 North Carolina exempted small lenders from an interest rate cap of 36% for a period of four

years. After seeing the negative impacts created by unrestricted payday lending, the state

legislature resumed the cap.

8

internet to sell their services. Customers themselves often willingly contribute to

the loopholes as well. For instance, whenever there are legal limits on the

number of loans and loan renewals available to an individual, having a spouse

or member of the household borrow from the same payday lender circumvents

these requirements. In other cases, the individual simply goes to another

payday lender, making it difficult for state governments to track and enforce

their laws.

Credit Unions

Nationally, there has been growing interest among traditional financial

institutions, particularly credit unions, to compete head-to-head with payday

loan companies by offering non-traditional financial services. These can include

payday-type loans and check cashing at affordable rates and structures.

Credit unions are financial institutions formed by an organized group of people

with a common bond, such as employment, location, or a demographic focus.

Members of credit unions pool their assets to provide loans and other financial

series to each other. Legally, they are not-for-profit cooperatives.

Many of these traditional credit unions are reaching out to customers who

historically relied on payday loans for small cash, short-term loans. Research by

the National Credit Union Foundation estimated that 7 to 15 percent of credit

union customers use payday loan products.11 Some examples of small loan

products offered by credit unions around the country are:

Salary advance loans at 12% annual percentage on the condition that

the borrower places 5% of the loan into a savings account for future

financial emergencies

11 Credit Unions Make Payday Loans Affordable, National Credit Union Foundation,

http://www.ncuf.coop/?sectionpath=1/105/106&pageid=552

9

Seven-day term loans at 18% APR with no fee for members who have

been with the credit union at least six months and have either direct

deposit or repaid a previous loan

Payment of an annual fee of $35, plus interest payments of $3 per month

Members of at least 60 days can qualify for a 30-day cash advance

regardless of credit history, but must show proof of income, are not in the

process of filing bankruptcy, and have n delinquent loans, charge-offs, or

negative share accounts

A variation of the traditional credit union is the ―low-income credit union‖ (LICU).

These credit unions specifically target high-risk, low-income customers. The State

of Washington allows low-income credit unions through RCW 31.12.413. State

law requires low-income credit unions to have:

―At least 50% of a substantial and well-defined segment of the credit

union's members or potential primary members earn no more than 80% of

the state or national median income, whichever is higher‖

―…an acceptable written plan on marketing to and serving the well-

defined segment‖

TULIP (Thurston Union of Low Income People) Cooperative Credit Union is a local

example of a LICU.

Because the members of low-income credit unions lack the ability to capitalize

their own loan pool, the state allows them to accept shares and deposits from

nonmembers. ―Nonmembers‖ may include other credit unions, state and

federal agencies, and nonprofit organizations.

The process for establishing a credit union is a lengthy one that can take two to

four years. More significantly, the process requires significant resources for start

up costs and the long-term capitalizing the loan pool.

10

Community Development Financial Institutions

A broader category of financial institutions focusing on underserved markets or

populations are community development financial institutions (CDFI). A CDFI

may take the form of a community development credit union, community

development bank, community development loan fund, or community

development venture company. Those CDFI entities that certify with the US

Department of Treasury Community Development Financial Institutions Fund

(CDFI Fund) are eligible for monetary awards and allocation of tax credits.

However, not all CDFI-type institutions in the nation are certified. The orientation

of most programs accessing the CDFI Fund focuses on larger scale home and

business loans to low-income communities and individuals. See Appendix ―A‖

for details of CDFI Fund capitalization and tax credit programs.

Establishing a CDFI is a secondary process that occurs after the formation of a

financial institution. For example, TULIP, a LICU, is also a CDFI.

Financial Intermediaries

A financial intermediary is an institution, business, organization, or individual that

acts as a go-between for two or more parties to channel funds between lenders

and borrowers. Typically, financial intermediaries deal in loans and mortgages.

Financial intermediaries are a recent alternative to payday loan companies.

The concept is to connect those citizens who rely on check cashers, pawnshops,

and payday loan offices for their lending needs with traditional financial

institutions, such as credit unions and banks. Most of these people are

―unbanked‖ due to income, citizenship, or lack of financial knowledge.

The City of San Francisco launched a financial intermediary in September 2006

after one and one-half years of planning and negotiations with local financial

11

institutions. Called Bank on San Francisco, this program is a collaboration of 13

financial institutions that offer no- or low-cost banking services to low-income

customers. The city and the financial institutions agreed upon a basic structure

for the program that included checking accounts with no monthly minimum

balance, acceptance of foreign issued identification cards, and money

management classes. Customers access Bank on San Francisco services on-line

or by telephone. The program has already helped over 16,000 citizens obtain

accounts since its inception.

The city has followed up with the program with legal restrictions to payday

lending – new payday loan offices are not allowed within one-quarter mile of

one another.

12

The Coastal Cash Concept

Coastal Community Action Program (CCAP) intends to create for low-income

people in Grays Harbor County a ―storefront‖ financial intermediary as an

alternative to payday loan and check cashing businesses. CCAP, acting as the

financial intermediary, will connect low-income people who have poor or no

credit histories with local financial institutions offering specialized programs for

these customers. Entitled ―Coastal Cash,‖ this financial intermediary program

will assist low-income families in Grays Harbor and Pacific Counties in finding

affordable check cashing, small credit lines, and basic banking needs.

Part of the appeal for Coastal Cash is that it will reach out to users of check

cashing services and payday loans by creating a less intimidating, formal

environment of a bank or credit union. This atmosphere competes head-to-

head with the simpler environment of the payday loan and check cashing

institutions. More importantly, low-income customers will have range of

affordable checking, loan products, and protective payee services at

affordable rates.

In addition to connecting the individual with traditional banking services,

Coastal Cash will put low-income customers onto a firmer road to financial

security by offering programs in money management.

The foundation to the Coastal Cash financial intermediary model will be with the

partnerships it intends to form with local banks and credit unions. These financial

partners will be the source of the banking and loan products offered to Coastal

Cash customers.

13

Working with Customers

Coastal Cash will provide low-income customers with one-stop shopping for their

daily banking services in an office similar to a payday loan office.

With an office location in Aberdeen or Hoquiam along a main transit route, its

physical arrangement and atmosphere will be informal and relaxed, similar to

any typical payday loan or check cashing office. Like payday loan offices,

hours of operation will serve the needs of working people. Services will be bi-

lingual to welcome the growing Hispanic population in the county and their

needs.

The Coastal Cash design is a relatively simple one. For example, a first time

customer needing a cash advance or a check cashed will come to Coastal

Cash for assistance. Bi-lingual staff will welcome the individual and begin

interviewing the customer to evaluate his or her needs. After completing a

customer profile, Coastal Cash staff will begin the process of finding a

compatible local financial institution for the individual to work with. Ideally,

there will be five to ten local financial institutions to choose from, with each one

providing a range of services at appropriate rates. As staff ―shops‖ the

customer to participating financial partners, the customer will watch a fifteen-

minute educational video on money management.

While individual needs may vary, assistance may typically entail setting up the

customer with a checking account and facilitating a small cash advance loan.

Once a transaction is complete, cash will be available to the customer at the

office through an on-site automatic teller machine (ATM). Customers will be

able to make loan payments and deposits through the ATM as well.

14

While at the office, Coastal Cash staff will work with the customer to enroll in

further money management workshops or on-line educational programs.

Arrangements for individual credit counseling will also be available through the

office. Customers who successfully complete a course will qualify themselves for

different banking products.

As customers establish themselves with Coastal Cash, their future visits will be

short, and best of all, affordable.

Banking Services Available

Coastal Cash plans to facilitate traditional banking services tailored to the

needs of low-income households through its financial partners. These services

will minimally include:

No minimum balance checking requirements

Accepting alternative identification cards12

Free check cashing by providing customers with a ―stored-value‖ or

―smart‖ debit card13

An in-house ATM to cash debit cards

No-fee cash advance loans with maximum APR of 21%

Cash advance loans for thresholds as low as of $100

Loans of $500 available for those customers with automatic deposits to

checking account

12 This may include Individual Taxpayer Identification Numbers (ITIN) or consular issued

identification cards. 13 Stored-value or "smart" cards look like credit cards but are actually prepaid cards. A stored-

value card has a set value that decreases as the card is used. For example, a $10 phone card

will provide $10 worth of service. Upon depletion, the customer can buy another card.

Smart cards are more flexible because they contain an integrated microchip that is

programmable to provide information codes as well as financial information. The prepaid value

of a smart card decreases as you use the card but can be increased by paying for additional

value. Many colleges issue smart cards that give students access to food services, vending,

photocopying, laundry, telephone and other purchases as well as access to the library,

laboratories and other secured areas on campus.

15

Free protective payee services to ensure bills are getting paid

The ATM system will eliminate the need for any cash handling on site by Coastal

Cash staff.

Recommended Locations

Coastal Cash initially plans to open a single location in either Aberdeen or

Hoquiam. If future activities warrant, Coastal Cash will expand appropriately.

Proposed sites for the first Coastal Cash are:

1022 E Wishkah, Suite A, Aberdeen ($1050 including utilities, needs

upgrades)

Across from McDonalds in Hoquiam

Gateway Mall (next to Staples)

In the vicinity of Heron and H Street in Aberdeen

In the Emerson Manor or nearby downtown Hoquiam

Money Management Education

Helping low-income people help themselves become financially secure is a

commitment of Coastal Cash. This includes not only facilitating affordable loan

and banking for their customers, but increasing their personal knowledge in

making sensible financial choices.

Coastal Cash intends to develop an education program around the Federal

Deposit Insurance Corporation’s (FDIC) Money Smart Curriculum. The purpose

of the Money Smart Financial Education Curriculum is to foster financial stability

for individuals, families, and entire communities. The program teaches people

about credit and banking services so they increase savings, buy homes, and

improve their financial health and well-being.

There are ten components to Money Smart Financial Education Curriculum:

16

Bank on It: Intro to bank services / how to open account

Borrowing Basics: Learn how to use credit

Check it Out: How to use checking account

Money Matters: Budgeting

Pay Yourself First: Importance of Saving

Keep it Safe: How to financially prepare for emergencies, your rights as

bank customers, predatory lending, ID theft

To Your Credit: Importance of building credit history

Charge it Right: How to shop / use credit card responsibly

Loan to Own: Teaches about consumer credit loans

Your Own Home: Determine readiness to buy house

Each module takes between 1-2 hours of classroom time to teach. The modules

may be taught in any order or combination. A computer-based version enables

individuals to complete Money Smart at their own pace on a computer in

English or Spanish. The CBI is available online or can be ordered on CD-ROM.

The FDIC provides the Money Smart curriculum to interested parties free of

charge. A limited number of copies are available to each party; however, the

materials are easily reproduced and have no copyright restrictions.

Financial Institutions and Community Partners

The foundation to Coastal Cash will be the local financial institutions and

community partners that participate in and support the program. Through

Coastal Cash, financial institutions and community partners will remove the

barriers that low-income people face in accessing affordable banking services

in Grays Harbor County.

Financial Institutions

17

Everyone benefits from Coastal Cash, including participating financial

institutions. By working together, Coastal Cash will help participating banks and

credit unions find new customers from within the community. For banks

especially, Coastal Cash will be an attractive approach for meeting Community

Reinvestment Act (CRA) requirements. This opportunity will be a major

marketing strategy for their involvement and commitment.

Already Coastal Cash has secured a foothold among financial partners with the

joining of Anchor Bank into the planning phase of this project.

Anchor Bank has been in business since 1907 and their corporate headquarters

is located in Aberdeen, WA. Anchor currently has 18 branches in eight counties

in western Washington. Anchor is a very important part of the communities of

Grays Harbor and Pacific counties and is committed to meeting the needs of

low-income residents in the community. They have an extensive portfolio of

past projects benefiting low- and moderate-income households, especially in

Grays Harbor County. Anchor has excellent relationships with existing regulatory

authorities that would need to be involved in the creation of a project like this as

well as a very strong background as a commercial lending institution.

Jim Boora, the newly retired CEO and President of Anchor, has been an active

participant in designing the Coastal Cash project in conjunction with CCAP. He

has also been involved in numerous statewide Community Reinvestment Act

projects and is currently serving as the Chairman of the Washington Community

Reinvestment Association Board of Directors.

In the next development phase of this project, Coastal Cash intends to recruit

additional financial partners. Currently, there are eight banks and six credit

18

unions with main offices or branches in Grays Harbor County.14 Coastal Cash

intends to have at least three to four firm commitments from banks and/or credit

unions before start-up.

Early on in its business plan development phase, Coastal Cash proposes to invite

local financial institutions to a series of project development workshops to

create product lines, design a marketing program, and formulate a financial

education program using Money Smart. By collaborating and agreeing on the

design of the program, Coastal Cash wants to use the knowledge base of

financial institutions to develop and build ownership in an innovative product

line.

Community Partners

In addition to financial institutions, Coastal Cash wants to invite community

partners to bring other expertise and resources to the program. Community

partners can contribute a wide range of services, such as hosting financial

training seminars, credit counseling, marketing services, web design, computer

services, translation services, legal services, etc. Coastal Cash intends to recruit

these community partners in conjunction with their efforts with the financial

institutions.

Funding Coastal Cash

The funding needs of Coastal Cash will differ over the next several phases of the

project. Over the project’s next three phases, grant funding will be critical to

developing a business plan to fine-tune the project design, covering initial start-

14 Anchor Bank, Bank of America, Bank of the Pacific, Key Bank, Sterling Savings Bank,

Timberland Bank, US Bank, Washington Mutual, Grays Harbor Woodworkers Credit Union, Great

Northwest Federal Credit Union, Longshore Federal Credit Union, Newrizons Federal Credit Union,

TwinStar Credit Union, and Utility Employees Federal Credit Union.

19

up operational and capital costs, and subsidizing long-term operations until

financial self-sufficiency takes over.

Completing the business plan will be the first immediate need for grant funding,

a cost estimated at approximately $50,000.

Finding a route for Coastal Cash’s long-term self-sufficiency will be one of the

objectives emanating from the business plan. Preliminary consideration of

potential income sources for Coastal Cash include the payment of finder’s fees

by financial institutions for customer referrals, subsidy payments from

participating financial institutions, and affordable brokerage fees for customer

services. A key component to approaching banks in particular is the potential

for satisfying Community Reinvestment Act requirements by investing financially

in this project.

Appendix ―D‖ contains a preliminary list of potential funding resources that

Coastal Cash intends to pursue. Due to the lag time between applying and

receiving foundation support, Coastal Cash will need to implement a

development program strategy as early as September 2008.

Applicability of State Financial Institution Laws to Coastal Cash

The Coastal Cash concept is a new approach in Washington State and

regulators from the Washington Department of Financial Institution (WDFI) will

need to study the proposal before making a definitive ruling on what licenses or

rules will apply to the program.

Early conversations with WDFI staff indicate that Coastal Cash activities may fall

under the Consumer Loan Act, Chapter 31.04 RCW, and the Credit Services

Organization Act, Chapter 19.134 RCW.

20

The Consumer Loan Act regulates lending activities to high-risk borrowers that

charge interest rates above 12% to a maximum of 25%. WDFI requires entities

engaged in these lending activities to have a license and meet certain

performance and reporting criteria. Chapter 208-620 WAC contains the

regulations for implementing Chapter 31.04 RCW. Although Coastal Cash will

not be making loans directly to customers, it will act as a broker. WAC 208-620-

260 provides guidance on this issue:

(1) As a consumer loan licensee, you may broker loans in the state of

Washington provided that those loans are brokered under either the Consumer

Loan Act or the Mortgage Broker Practices Act.

(2) If you broker loans under the Consumer Loan Act, those loans are subject to

WAC 208-620-240 and must be counted in the calculation of the annual

assessment.

However, this provision may not apply; it suggests that those entities licensed for

making consumer loans may broker them as well. Since Coastal Cash will not

make consumer loans itself, it remains unclear whether a financial intermediary

needs a license in the first place. This question will need resolution during the

business plan phase.

It is possible that Coastal Cash will not fall under Chapter 19.34 RCW, Credit

Services Organization Act. RCW 19.34.010(2)(a) defines a credit services

organization as:

―…any person who, with respect to the extension of credit by others, sells,

provides, performs, or represents that he or she can or will sell, provide, or

perform, in return for the payment of money or other valuable consideration any

of the following services:

(i) Improving, saving, or preserving a buyer's credit record, history, or rating;

(ii) Obtaining an extension of credit for a buyer;

(iii) Stopping, preventing, or delaying the foreclosure of a deed of trust,

mortgage, or other security agreement; or

(iv) Providing advice or assistance to a buyer with regard to either (a)(i),

(a)(ii), or (a)(iii) of this subsection.

Subsection (2)(b), on the other hand, goes on to read that:

(b) "Credit services organization" does not include:

(iv) Any nonprofit organization exempt from taxation under section

501(c)(3) of the internal revenue code

21

Next Steps: Coastal Cash Business Plan

CCAP intends to continue working in partnership with Anchor Bank to implement

the Coastal Cash concept. However, there remains a considerable amount of

work to for both CCAP and Anchor to accomplish before this program is fully

functional. The next phase, developing a business plan for Coastal Cash, will be

the most critical. The following steps outline the general tasks that will require

completion before beginning and as part of the business plan.

Obtain grant funding for preparing the business plan

Convene a summit of local financial institutions to introduce the Coastal

Cash concept and recruit commitment for participating in the business plan

Hold a series of workshops with financial institutions that focus on product

development, marketing, financial education, and funding

Reach written commitment from financial institutions regarding participation

in the Coastal Cash program

Develop a Coastal Cash organizational and funding structure that serves the

product line, including staffing and location details

Develop a five-year income and expense budget, including a development

strategy that addresses financial shortfalls

Identify and recruit community partners to provide ancillary support for

Coastal Cash

Explore the possibilities and advantages of CDFI certification

Determine regulatory requirements with Washington Department of Financial

Institutions

Prepare a draft business plan, circulate for comments

Assemble the final draft and have all participating parties sign for

acceptance

Appendix ―D‖ is an example business plan.

22

Appendix “A”

Comparison of TULIP Cooperative Credit Union & Bank on San Francisco

Table 3: General Description of TULIP LICU and Bank on San Francisco

TULIP Bank on San Francisco

An accessible, full service credit union

organization, which is owned and managed

by its low-income members.

Relies on financial partners, which have

designed special banking programs.

The Federal Reserve Bank of San Francisco

plays a key role in Bank on San Francisco. They

bring their expertise and resources in

partnering with and convening financial

institutions. They also give Bank on San

Francisco credibility with financial institutions.

Table 4: Summary of Basic Services for TULIP CCU and Bank on San Francisco

Basic Services

Accounts

Supported

Cash-on-

Hand or

ATM

Minimum

to Open

Direct

Deposit

Funds

Transfer

Financial Education

TULIP Checking

Savings

Additional

bank services

ATM Yes Yes Financial fitness seminars,

in person

*BSF Checking

(Second-

Chance

Checking)

Savings

Additional

bank services

Cash-on-

Hand &

ATM

$0 Yes Yes 6-hour money

management class and

other financial

education classes,

in person and on-line

*Bank on San Francisco

Table 5: Hours for TULIP CCU and Bank on San Francisco

Hours

TULIP Bank on San Francisco

Monday, Wednesday, Friday: 11:00am-6:00pm

Tuesday, Thursday: 11:00am-4:00pm

Saturday: 12:00pm-2:00pm

Traditional banking hours – varies by

participating financial institution

23

Table 6: Identification Requirements of TULIP CCU and Bank on San Francisco

Identification Requirements

TULIP Bank on San Francisco

Traditional Identification requirements.

Primary IDs

• California Driver License

• California State ID

• Passport

• Permanent Resident Card

• Military ID

• Consular ID

• Some accept other Consular ID cards

• Municipal Identification Cards

Secondary IDs (to verify an address):

• Certificate of naturalization,

• Recent utility bill, water bill, garbage bill,

Internet/cable, residential phone

• Student ID card

• Union membership card

• Employee badge, birth certificate

• Health insurance card

• Non-photo government aid card

Table 7: Fees for Services at TULIP CCU and Bank on San Francisco

Fees

TULIP Bank on San Francisco

Check mailed to third party $0.50

Overdraft Transfer from Savings $5.00

Inactive Acct Maintenance $10.00

Dormant Account Closure $10.00

Checking Acct Forced Closure $20.00

Debit/ATM Replacement $5.00

Returned Deposit Item $25.00

Savings Transfer $5.00

Printed Check Order $11.00

Account Research 10.00 p/hr

Loan Title Transfer at cost

Late Payment Fee $20.00

Balance Account /Statement $10.00 /hr

Cashier's Checks 1 free/day

Stop Payment $15.00

Non-Sufficient Funds $15.00

Wire Transfer at cost

Check / Statement Copy $1.00

Draft Retrieval $15.00

Credit Report $5.00 each

Outside Appraisal at cost

Many banks offer ―checkless‖ accounts that

limit account holders to making payments with

their card.

Some banks waive non sufficient funds fees for

a limited number of overdrafts.

24

Table 8: Sponsors and Partners for TULIP CCU and Bank on San Francisco

Sponsors / Partners

TULIP Bank on San Francisco

Homes First

Olympia Hostel Club

Group Health Credit Union

Washington State Employees Credit Union

Olympia Federal Savings

Whatcom Educational Credit Union

Navy Federal Credit Union

Verity Credit Union

Digital Federal Credit Union

Seattle Metropolitan Credit Union

Northwest Corporate Credit Union

Catholic Credit Union

Society for the Study of Social Problems

The Russell Foundation

O'Bee Credit Union

Boeing Employees Credit Union

Yakima Valley Credit Union

Credit Union Connection

Vantage Credit Union

San Mateo Credit Union

Pan American Bank

Over 170 bank and credit union branches are

participating, including:

Bank of America

Bank of the West

Citibank

Mission Area Federal Credit Union

Mission National Bank

Northeast Community Federal Credit Union

Patelco Credit Union

Redwood Credit Union

San Francisco Federal Credit Union

Spectrum Federal Credit Union

Sterling Bank & Trust

Union Bank of California

United Commercial Bank

US Bank

Washington Mutual

Wells Fargo

25

Appendix “B”

Model: Prosperity Credit Union

(Scheduled to open in the fall 2008)

Prosperity Credit Union (PCU) in King County is a National Model for providing financial

services to low income families and communities. Prosperity plans to offer:

Basic savings, checking & debit accounts; affordable with

simplified fee and rate structures. The debit account will be

structured so that individuals can not overdraft their accts

No-fee / no-minimum checking & savings

Overdraft protection debit cards

Minimum and flexible ID requirements to open accounts

―Payday like‖ loans (Affordable and fair cash transaction

services such as check cashing and short-term loans)

Financial literacy training

Wire transfers and the ability to purchase money orders, if

needed, at an affordable rate

Respectful, culturally appropriate and convenient services

Prosperity Credit Union will deliver financial support and education services that better

connect low-income individuals with affordable options and the resources to gain

financial independence such as:

Free financial literacy training

Credit repair counseling

Skill development classes or workshops tied to IDAs

Language translation or multilingual services

Free assistance applying for the federal Earned Income

Tax Credit

Assistance preparing federal tax returns

Free assistance securing ITINs (Individual Taxpayer ID Nos.

used by non-native workers who don’t have a SSN)

Form Partnerships with:

Medina Foundation

BECU

Community Capital Development

A network of cooperating local social services agencies

Guiding Principles

26

Table 9: Timeline for Prosperity Credit Union (PCU) and Prosperity & Communities Together (PACT):

PROSPERITY CREDIT UNION & PACT

Start Up Year

Q2-2007 Begin CEO recruitment process

Formalize partnerships with local socials service providers (written MOAs)

Finalize partnership with BECU

Secure additional capital through foundation grants

Q3-2007

Continue CEO recruitment / interviews

Identify potential spaces for main branch

Continue securing required capital – foundation grants, non-member deposits from

banks, credit unions; corporate donations, private investors

Q4 -2007 Hire CEO

Start recruiting for the Directing Manager of PACT

Finalize space requirements for main branch

Develop CU brand; draft marketing and outreach strategy

Begin 501(c)3 process & apply for federal tax exempt status

Finalize work plans with community partners

Work with Department of Financial Institutions for state charter for CU

Continue securing required capital

Year 1 Prosperity Credit Union PACT affiliated 501(c)3

Q1-2008 Formalize board

Receive state charter

Build out space for main branch

Finalize initial CU product offering

Work w/BECU to design, develop

banking infrastructure for initial products

Finalize marketing materials

Hire Directing Manager Q4 and

formalize board

Finalize initial service offerings

Finalize outreach strategy w/partners

Identify partner satellite office

Work with community partners to hire

―community tellers‖

Finalize / translate marketing materials

Q2-2008

Hire & train CU staff and tellers

Finalize banking infrastructure systems

Finalize main branch build-out

Launch marketing

Hire & train ―community tellers‖

Start community outreach efforts to

raise awareness of the CU

Launch marketing

Q3 & Q4 -

2008 Provide Services in limited locations:

Main branch (south of downtown)

Selected locations via space at social

service areas

At other Credit Union locations via the

Shared branching network

Via the ATM network

Provide limited financial support srvcs:

Financial literacy

Translation services

General outreach and education

services

Receive funding to provide IDAs

Develop evaluation /outcome metrics

27

Year 2 Prosperity Credit Union PACT affiliated 501(c)3

Q1 & Q2

2009

Increase offsite service locations by

increasing then number of social service

agencies providing desk space for

roving tellers

Plan and design back office systems to

support online banking

Continue with marketing and

outreach efforts

Additional product development as

needed by customers

Q3 & Q4

2009

Ongoing service provision

Evaluate & refine services

Work with community partners to

evaluate MOUs; refine partnerships

Continue with service provision

Evaluate and refine services

Year 3 Prosperity Credit Union PACT affiliated 501(c)3

Q1& Q2

2010

On an as needed basis, increase the

number of offsite service locations

through ―community tellers‖

Identify additional branch sites as

needed –considering community needs

Implement online banking services

Increase the number and type of IDAs

available to low-income members

Refine and add new financial support

services on an as-needed basis

Q3 & 4 -

2010

Full service implementation complete

Ongoing evaluation and refining

Full service implementation complete

Ongoing evaluation and refining

Prosperity Credit Union Financial - $5,890,000 philanthropic support:

$675,000 startup costs for PCU: $275,000 startup costs / $400,000 equity grants

Remaining philanthropic support will underwrite cost of financial education and

support services to include

• Community outreach and education

• Individual financial literacy training

• Asset building programs (subsidized savings account)

• Assistance applying for EITC (Earned Income Tax Credit)

• Community tellers

BECU will provide PCU with an in-kind donation of the financial services

infrastructure and systems needed to offer full-suite of banking services at an

affordable cost. After 5 years PCU will cover the marginal costs through its

operating revenues

28

Appendix “C”

Payday Loan Comparisons

Table 10: Payday Loan Companies in Aberdeen/Hoquiam Area and Online

PAYDAY LOAN COMPANIES IN ABERDEEN / HOQUIAM AREA & ON-LINE

Company $200 Finance Charge $500 Finance Charge ARP

Elma Payday Loans*

203 N 3rd St, Elma, WA $30 $75 391.07%

Quik Cash #821

2702 Simpson Ave, Hoquiam $30 $75 391.07%

Paycheck

716 W Market St, Aberdeen

$30

$20 if pd in 2 wks

$75

$40 if pd in 2 wks 391.07%

DiscountAdvances.com

Apply by Phone 1-866-804-4266 $35.00 $87.50

912.50%

7 days

MoneyTree

Washington $30 $75 391.07%

www.staradvance.com

―Star Guaranteed Lowest Payday

Loan Rates Online‖

$17.80 $44.50 232.04%

PayDay One

The Smarter Cash Advance $30 $75 391.07%

UrgentCashAdvance.com

online $30 $75 391.07%

Loan Star Payday Loans

409 E Market St, Aberdeen $30 $75 391.07%

Advance Til Payday

1022 E Wishkah #B, Aberdeen $30 $75 391.07%

Loan Star Payday Loans LLC

100 Brumfield #2, Montesano $30 $75 391.07%

Check Into Cash Advance Payday

315 Cooper Pt Rd NW #104, Oly $30 $75 391.07%

Loans 4 You Payday Loans

2121 Olympic Hwy N # 109, Shelton $30 $75 391.07%

*($15.00 for every $100.00)

29

General Services Associated with Payday Loan Centers:

Charges: $25.00 for returned check fee if the check is dishonored

Fees / APR calculated based on a typical 14-day term

Prepaid debit cards can be used to withdraw cash from selected ATM

locations and to make purchases at merchants that accept pin-based

debit cards.

Money Orders (prices range)

Wire Funds Transfers

Fax Services and Copying

Postage Stamps

Bus Passes

30

Appendix “D”

Funding Research

American Express Foundation

American Express Foundation grants provide education and career training opportunities for

disadvantaged students.

http://home3.americanexpress.com/corp/gb/howto.asp

AT&T Excelerator Grants

Assist organizations serving diverse ethnic groups, low-income families, people with disabilities,

youth & seniors. The AT&T Excelerator program provides technology access to organizations

working to strengthen underserved communities by helping non-profits integrate technology

into their operations and community outreach.

http://www.att.com/gen/corporate-citizenship?pid=7745

Bank of America Foundation

Bank of America’s local market presidents and their local leadership teams take ownership of

determining how best to disburse funds in their neighborhoods, whether it’s for a hospice

organization, the local senior center’s programs, or crisis assistance. They do this several ways:

Consult with local leaders to determine the most pressing challenges of community

Deploy our signature Neighborhood Excellence Initiative program

Make charitable grants to local, regional, and national programs and partners

Fund anchor institutions such as colleges, hospitals, and museums to help create

economic stability and generate economic growth

Demonstrate though leadership by convening local leaders to discuss issues, share best

practices, and elevate the level of knowledge to address complex challenges

Determine organizations & causes that will be supported by Bank of America local grants

Each of these tactics depends upon Bank of America’s on-the-ground leaders knowing the

people who can understand and articulate the needs of their communities and provide the

best partnerships to address those needs.

http://www.bankofamerica.com/foundation/index.cfm?template=fd_localgrantmaking

Department Of Housing and Urban Development: Housing Counseling

This program provides grants to approved counseling agencies that in turn provide counseling

to citizens about financial literacy.

http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm

Educational Foundation of America

The Educational Foundation of America (EFA) makes grants to qualifying non-profit

organizations that have tax-exempt status for specific projects.

http://www.efaw.org/Inquiry%20Guidelines.htm

31

Fifth Third Bank

The Fifth Third Foundation awards grants to not-for-profit organizations that support four primary

areas: arts and culture, community development, education, and health and human services.

These areas of emphasis help the Fifth Third Foundation focus its giving to make the greatest

possible impact. Grants are awarded to organizations to help nurture their growth and good

work, or to help them cultivate an environment in which positive changes can improve lives.

www.53.com/wps/portal/personal

First Nations Development Institute

Sarah EchoHawk Vermillion, Vice President of Development and Communications

Providing grants and technical assistance to ultimately make the residents of reservation

communities better-educated consumers of financial products and services.

svermillion@firstnations.org

HSBC

HSBC established the Financial Education Grant program in 2001 to provide individuals access

to resources to help them make knowledgeable financial decisions, enabling them to achieve

a sound financial future.

http://www.hsbcusa.com/ourcompany/pressroom/2006/news_052406_1_million_grant.html

Key Bank Philanthropic Investment Resources

Our grants primarily fund programs that enhance economic self-sufficiency within our strategic

priorities of financial education, workforce development, and diversity through:

Financial Education — programs that increase economic self-sufficiency by fostering

effective financial management and understanding of financial services and tools,

which create stronger and more productive populations

Workforce Development — programs that increase economic self-sufficiency by

providing training and placement for people to access job opportunities for a stronger

and better prepared workforce

Diversity — programs that promote inclusive environments by employing systemic

changes to improve the access of individuals of diverse backgrounds and encourage

them to realize their full potential

https://www.key.com/html/A-12.3.html

Lowe’s Community Giving

Lowe’s Charitable and Educational Foundation awards more than $1.5 million annually to

individuals and organizations for areas including community improvement projects, education

scholarships for trade disciplines, and environmental initiatives that enhance the natural

environment.

http://www.lowes.com/lowes2/AboutLowes/careers/careers_diversity_fair.html

32

Medina Foundation

The Medina Foundation provides various types of funding including general operating support,

capacity building, social enterprise and grants for start-ups, projects and programs.

We give preference to innovative and effective programs that meet critical needs and fill an

important niche in the community.

http://www.medinafoundation.org/index.php?p=Grants&s=3

MoneyWi$e Program

Awards financial education grants totaling $75,000 to community non-profit groups in 13 states.

(NOTE: not Washington State). By providing free brochures in multiple languages (English,

Spanish, Chinese, Korean, and Vietnamese) the MoneyWi$e program is able to address

financial literacy across both income and ethnic barriers.

http://www.consumer-action.org/press/articles/moneywie_program_awards_financial_education_grants/

National Credit Union Administration:

Community Development Revolving Loan Fund Program

The National Credit Union Administration’s Community Development revolving Loan Fund was

established by Congress to support credit unions that serve low-income communities by

making loans and Technical Assistance Grants available to qualifying institutions.

http://www.ncua.gov/Credituniondevelopment/Programs/FinanceGrants.htm

NEFE (National Endowment for Financial Education)

A fundamental element in all projects is the necessity to address optimal financial behaviors.

Projects should include outcomes relevant to understanding or improving financial behaviors of

specific segments of the American public or the public in general. NEFE encourages inquiry

within the physical, social, and psychological sciences to facilitate the public’s ability to

improve personal financial well-being. Findings must be presented in a manner that engages

educators, policy makers, segments of the public, and/or individuals to adopt policies,

practices, attitudes, and skills that result in positive public and personal outcomes.

http://www.nefe.org/tabid/81/Default.aspx

Sterling Savings Bank

Sterling Savings Bank invites non-profit organizations to apply for CRA grants, on an on-going

basis, limited to the following purposes:

Promote and provide affordable housing for low and moderate-income families.

Provide financial education for low and moderate-income families.

Promote and provide resources for the development of small business, including micro

lending.

Please remember that Sterling Savings Bank considers capital campaigns a low priority. Grant

funds are reserved primarily for those areas where Sterling has its offices and employees

located. No donations are given to organizations that discriminate.

http://www.sterlingsavingsbank.com/about/community/about_comm_cra_grant.aspx

33

TD Banknorth

Offers $100,000 in New Training Grants for Non-Profit Organizations. New grant program to

support job training, education, growth opportunities for non-profits

Up to $1,000 to eligible organizations for employees to attend classes and course that

will strengthen job performances

Funding targeted to 501(c)(3) organizations that support affordable housing for low- and

moderate-income families or support activities that promote economic development at

the small business level

www.tdbanknorth.com

Wachovia NEXT

Awards for Opportunity Finance

$8.35 million for responsible lenders known as Community Development Financial Institutions

Awards offered each year from 2007-2011

Awards to 2 CDFIs a year (one-time) / 4 CDFIs will receive grants

1. 1 $5 million below-market loan plus $500,000 unrestricted grant (to CDFI with $50

million in capital dedicated to lending or investing

2. 1 $2.5 million below-market loan plus $250,000 unrestricted grant (to CDFI with $10-

$50 million in capital

3. 4 unrestricted grants of $25,000 each to CDFIs that have demonstrated excellence in

advocacy, community impact, financing, or innovation

http://www.nextawards.org/

Washington Mutual Giving Programs & Partnerships

Washington Mutual is pleased to team up with nonprofit organizations by investing in their

efforts to build stronger communities.

Washington Mutual awards millions of dollars in cash grants each year to support K-12 public

education, financial education, affordable housing and community development.

If your proposal fits into one of our focus areas, we invite you to get in touch with us. View

detailed information on how to apply for a grant, where we fund and an application checklist.

http://www.wamu.com/about/community/programspartnerships/default.asp

Wells Fargo Corporate Giving

Wells Fargo is only as successful as the neighborhoods and communities where we do business.

Through community development programs, we support low-income and ethnic minorities by

providing affordable housing programs and initiatives, credit counseling, financial education

seminars, and technical assistance for small business owners. In 2007, Wells Fargo donated

approximately $21 million to community development programs.

https://www.wellsfargo.com/about/charitable

34

Appendix “E”

Research Resources

FannieMae Foundation

Case Studies

Innovations in Personal Finance for the Unbanked: Emerging Practices from the field

1. Transactions and Basic Banking

2. Access and Second-Chance Accounts

3. Alternative Payday Lending and Basic Banking http://www.fanniemaefoundation.org/programs/pdf/fscs_Case_Studies_Intro.pdf

Federal Trade Commission

Protecting America’s Consumers - FTC Consumer Alert

Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives

The ads are on the radio, television, the internet, even in the mail. They refer to payday

loans, cash advance loans, check advance loans, post-dated check loans, or deferred

deposit loans. The Federal Trade Commission, the nation’s consumer protection agency,

says that regardless of their name, these small, short-term, high-rate loans by check cashers,

finance companies and others all come at a very high price. . . . www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt060.shtm

Foundation Center

Talking about Philanthropy, Grantmakers in the News, March 1, 2003

Fifth Third Bank Launches Financial Independence Programs in Ohio

In May 2002, fifth Third Bank received a First Accounts grant in the amount of $760,863 from

the U.S. Department of the Treasury. The grant funds will be used to connect 1,000 low- and

moderate- income individuals in Columbus, Ohio to accounts at insured depository

institutions over a two-year period and provide financial and economic literacy training.

Additional funding and in-kind contributions are coming directly from the bank. http://foundationcenter.org/cleveland/gitn/cl_gitn_030103.html

JPMorganChase

Resource Guide: Curbing Predatory Lending

Predatory payday lending refers to the practice of flipping small, short-term loans

repeatedly at annual interest rates that average about 400%. They are called ―payday

loans‖ because they are marketed as a tool for cash-strapped borrowers to make it to the

next paycheck. These loans are secured by holding the borrower’s signed personal check.

Because the entire loan is due on their next payday, usually less than two weeks, most

borrowers find they cannot afford to pay their loan off, so they roll the loan over and pay

even more in interest and fees. Rolling the loan over is illegal is many states, but payday

lenders avoid that restriction by ―flipping‖ the loan, that is, closing the loan out and

reopening it immediately or within the next few days. . . . http://www.cfed.org/institute/rg/05_rg_predatorylending.pdf

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JPMorganChase

Resource Guide: Support for Community Development Lenders

The opportunity finance industry is composed of Community Development Financial

Institutions (CDFIs) and other private sector financial intermediaries. The industry is a critical

engine for the nation’s economic growth and inclusion. CDFIs have community

development as their primary mission. While CDFIs share a common mission, they have a

variety of structures and lending goals. There are six basic types of CDFIs:

1. Community development banks

2. Community development loan funds

3. Community development credit unions

4. Microenterprise funds

5. Community development corporation-based lenders and investors

6. Community development venture funds.

All are market-driven, locally-controlled, private-sector organizations. CDFIs are committed

to indentifying market gaps and delivering products and services to people and

communities not adequately served, and to providing technical assistance to help

consumers function better in the market economy. http://www.cfed.org/institute/rg/09_rg_stateCDFI.pdf

Lending Club

Interest Rates and How We Set Them

Lending Club’s interest rates take into account credit risk and market conditions to ensure

that rates are fair, commensurate to the level of risk, and attractive to both lenders and

borrowers. The final interest rate for each loan grade is the result of the following equation:

Lending Club Base Rate + Adjustment for Risk & Volatility

Table 1 lists FICO scores and their associated loan grades.

www.lendingclub.com/info

OCC: Community Affairs

Community Development Financial Institution and

Community Development Bank Resource Directory

This directory provides easy access to information for a sampling of organizations that can

provide resources to banks interested in investing in Community Development (CD) Banks

or Community Development Financial Institutions (CDFIs). It also provides materials of

interest to banks considering converting to a national CD Bank or organizations considering

forming a CD Bank. The activities are organized under the following categories:

1. OCC’s Community Development Bank Resources

2. CDFI Fund Programs

3. Low Income Credit Unions

4. Financial Intermediaries for CDFIs

5. Microenterprice CDFIs

6. Venture Capital CDFIs www.occ.treas.gov/cdd/cdresourcedir.htm

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OpportunityFinance Network

About Opportunity Finance Network

Finding and financing opportunities that others miss

Opportunity Finance Network is the leading network of private financial intermediaries

identifying and investing in opportunities to benefit low-income and low-wealth people in

the U.S. Our financing delivers both sound financial returns and real changes for people

and communities. . . www.opportunityfinance.net/about/about.aspx

Washington State Budget & Policy Center, Policy Brief January 2007

High Interest, Lost Opportunity, Mapping the cost of payday lending in Washington State

An important obstacle faced by lower income families is that they are often required to

pay higher prices relative to higher income families for the same services. A key example

of this obstacle (and the focus of this report) is the market for basic financial services such

as cashing paychecks and short-terms loans, where lower income people are harshly

penalized by interest rates that soar well above 300% on an annualized basis. It is a

problem with well understood causes and, increasingly, solutions. . . . http://www.budgetandpolicy.org/documents/highinterest.pdf