Banking on South-Central : After 5 Years, Charter Approved for Credit Union That Will Serve the Area

Clyde Johnson, president of the Black Employees Assn. in Los Angeles, has high hopes that his dream is about to come true.

He is scheduled to open a credit union later this month to serve South-Central Los Angeles after five years of trying to sell the idea to federal officials. He received his banking charter in November and has been preparing ever since to open for business as the South-Central Los Angeles Community Development Federal Credit Union.

The credit union would be the area’s first, and it would cover one of the largest, most populous urban areas ever chartered.

It is intended to serve about 600,000 people who live, work or worship in an area bounded by the Santa Monica Freeway on the north, Imperial Highway on the south, Alameda Street on the east and La Brea Avenue on the west. The area includes part of the Crenshaw District as well.

Economic experts believe that these kinds of financial institutions are just what is needed in South-Central--an area where bank branches are scarce and whose residents badly need mortgage and business credit. There is a state-chartered credit union in Watts but it covers a much smaller area.

Yet Johnson’s experience also reflects how difficult and frustrating it can be to capitalize on a sound banking idea in a lower-income area. The opening has been delayed time and again by what Johnson sees as unnecessary scrutiny for an urban location unfamiliar to banking regulators.

“They aren’t used to dealing with the inner city,” Johnson said, referring to officials with the National Credit Union Administration.

Regulators admit that it has taken nearly twice as long to open as most other credit unions. But they say they are merely acting as advisers, waiting for Johnson and the credit union board to decide matters of personnel and branch locations.

“It’s a sound decision for them to proceed cautiously,” said Jim Baylen, deputy regional director for the National Credit Union Administration.

“They’re working with us and using a very businesslike approach. We certainly support their position and would like to see them open as soon as possible. But planning makes for the most success.”

Johnson’s quest began in 1988, when he first asked the federal government to charter a credit union for South-Central.

As founder of the 22-year-old Black Employee’s Assn., a 6,000-member group that represents workers in discrimination grievances, Johnson said he had long seen the need for economic self-determination in the inner city and decided a credit union would be an important step in the right direction.

But banking regulators were put off by the size of the area to be served--50 square miles--and kept asking Johnson for more information.

“Our chartering policy for these types of credit unions doesn’t provide for one as large as this,” Baylen said. “Large areas aren’t perceived as having a population with a tight, common bond, which is an important element to have before being chartered.”

Government officials reconsidered after the riots of a year ago. Because regional credit union directors can only approve charters for up to 50,000 customers, Baylen said, the South-Central proposal had to be specially packaged and presented to national officials.

The charter was approved six months ago, and Johnson has since been working to satisfy the many additional requirements. After several false starts, the credit union is now scheduled to open May 15 at the Black Employee’s Assn. office on Crenshaw Boulevard. Two other branch locations have yet to be determined.

According to Johnson, the approval process has been unnecessarily slow. Regulators rejected two managerial candidates approved by the credit union’s board of directors, he said, then suggested a candidate who later decided that she did not want the job.

Baylen denied that his office has formally disapproved any candidates. The credit union board is now reviewing other candidates.

But the fact that setting up the credit union has run into some delays does not faze board member Juanita Tate.

“It’s going smoothly, considering the type of venture we’re talking about,” said Tate, executive director of Concerned Citizens of South-Central Los Angeles. “This isn’t a typical business. There are a lot of details that have to have regulatory approval. We’ve done the main thing in getting the charter.”

Despite the frustrations, Johnson said formation of the credit union is immensely gratifying.

He began the effort after Bank of America closed its Central Avenue branch, one of the few remaining in that area.

It was then, he said, that he realized the need for a financial institution operated by South-Central residents themselves.

“Even traditional banks that do business in the ‘hood don’t seek to improve it,” said Johnson, echoing a belief common in South-Central Los Angeles. “They take most of their deposits and invest them outside of the community.”

Since the charter was approved, Johnson has worked to secure pledges and deposits by speaking and distributing flyers at churches, malls, markets, organizations, clubs and other community venues.

So far, he has collected $5 million in pledges and donations, including commitments from the James Irvine Foundation and Union Bank.

All credit union customers who deposit at least $5 will own shares in the institution--much like shareholders in a company. Credit union customers will also have a say in how money is to be invested.

In addition to basic banking services (home and consumer loans, savings accounts, automatic teller machines), the credit union will feature a youth-lending program and special savings accounts aimed at developing the financial planning skills of college students.

Though the credit union is spearheaded by a labor organization that has historically served blacks, Johnson has distributed Spanish-language flyers and has contacted local Catholic parishes in an effort to reach Latinos, who account for a major portion of the credit union’s targeted population.

He has also submitted the names of two Latinos to the credit union board to be considered for membership.

“This is the people’s credit union,” Johnson said.