Loan Justice : Finance: A credit union has emerged in South Los Angeles where other lending institutions have feared to tread.

It seemed unlikely that Olga Cook could get a bank loan to fix her ailing Ford Explorer, its spent engine bleeding oil.

Cook, 62, had defaulted on two student loans and draws a modest salary from her job as a psychiatric technician. So with great apprehension, she filled out an application for a $2,500 loan from South Central People’s Federal Credit Union, the fastest-growing credit union in the south Los Angeles area and one a relative had told Cook might help her.

It did, as it has done for hundreds like her since opening almost two years ago.

Many of the credit union’s 1,400 clients would be turned away by mainstream banks. No matter. Born from an idea to nurture financial self-determination among the area’s low-income residents, the credit union provides loans and savings accounts to anyone with $35 who lives, works or worships in the 49 square miles bounded by the Santa Monica Freeway, Imperial Highway, Alameda Street and La Brea Avenue.

Although Cook’s delinquent loans raised some concern among the credit union’s volunteer loan committee members, the panel ultimately determined that her five-year employment record and steady efforts to resume payment on her defaulted student loans offset any blemish on her credit report.

That willingness to take a risk where most won’t has helped the credit union grow from 380 accounts its first year to about 1,400 this year--a jump 45% higher than its closest competitor. South Central People’s is now the fastest growing of 20 credit unions in south Los Angeles, according to statistics from the California Credit Union League.

What’s more, the institution is poised to gain an additional 350 members through a pending merger with a small credit union at the Frederick Douglass Head Start program.

Credit unions differ from banks because clients are shareholders and can vote for the volunteer board of directors that sets loan and operational policies. In addition, all profits are funneled back to members through lower loan rates or higher interest paid on savings.

At South Central, manager Tammy Brown says the institution makes extensive efforts to reach out to the community and provide banking services--especially loans--to people who have been historically denied them.

Poor credit histories among many in the south Los Angeles area, coupled with mainstream-bank redlining and racial discrimination, have long kept credit out of reach, experts say.

Nowhere is the credit union’s mission more evident than in figures indicating that it has lent roughly 99% of its $1.5-million asset base. The average loan amount has ranged from $2,000 for personal use to $15,000 to purchase new or used automobiles.

Yet in its eagerness to extend credit to people most other financial institutions would shrink from, South Central People’s has chalked up about 10% in delinquent loans--more than twice the average for California credit unions designated as low income. A loan is considered delinquent if no payment has been made in 90 days.

“I think the main thing is we’re really new to this,” Brown said, adding that under early lending guidelines, about 80% of loan requests were granted.

The rate of defaulted loans, however, does not raise concern among national regulators since so-called community development credit unions, like South Central People’s, historically operate with a higher delinquency ratio than regular credit unions, said Cherie Umbel, spokeswoman for the National Credit Union Administration.

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To curb delinquency, the credit union has begun to deny loan requests it previously would have granted and has hired a part-time bill collector to go after members who make no effort to arrange repayment on defaulted loans.

But even as South Central People’s tightens its loan policy, officials say, the institution is still committed to helping members realize their goals with increased efforts to assist in credit repair and a new program that allows 100 area youth the opportunity to run their own credit union.

While South Central People’s still needs a larger asset base to offer such services as checking accounts and small business loans, supporters say the institution has made great strides toward filling a near vacuum in full-service banking in the area.