Hoping to shatter the misconceptions and fears many recent immigrants have about buying on credit, a local nonprofit organization, with support from businesses and financial institutions, on Monday launched a program to teach Latinos about using credit wisely and avoiding bankruptcy.
For many in the Latino community, particularly immigrants who come from countries where credit is prohibitively expensive, bankruptcy often seems like the best way to get out from under debt, according to the Consumer Credit Counseling Service.
"If you're not informed and don't know, [filing for bankruptcy protection] looks attractive," said Gary Stroth, executive director of the CCCS, a 32-year-old Los Angeles-based agency that educates consumers of all income levels on preventing and solving financial problems.
Keeping in mind that at 38%, Latinos comprise the largest segment of Los Angeles County residents and thus represent a valuable bloc of consumers, several local businesses and banks have signed on to aid the campaign. Representatives from La Curacao, Robinson's/May and Dearden's department stores, Bank of America, Sumitomo Bank and Freddie Mac as well as U.S. Rep. Esteban Edward Torres (D-Pico Rivera) are helping CCCS in financing the program, which is based around public-service announcements on local Spanish-language television that encourage viewers to learn more about establishing good credit.
CCCS is also offering free one-on-one counseling.
"Until now, the Hispanic population has not had access to learning about good credit," said Hector Perez, vice president of finance for La Curacao, a Panorama City-based department-store chain that caters to Latinos.
"We feel there is a sense of obligation that we secure the financial security of our community," said Perez. "We believe that by educating, we can help these people and maintain their [credit] reputation."
Stroth said many Latinos who rack up debt turn to bankruptcy lawyers who propose no other solutions than filing for bankruptcy court protection.
Indeed, last week the federal courts reported that more Americans filed for bankruptcy in 1997 than ever before. In California, Stroth's organization estimates that 1997 bankruptcy filings rose 13.9% over 1996.
Among Latinos in California, the increase was 24%. One reason Latino bankruptcies are so high is that many people from Central and South America simply do not understand the conditions printed on applications, said Marcia Vila, a CCCS counselor based in Granada Hills. She said some creditors take advantage of those who speak little English and need money.
"You're traumatized with your problems," she said. "Are you really going to read all the contract?"
Vila also said new immigrants tend to carry notions from their home countries that only the upper classes may apply for credit. Others believe that small installments, sometimes as little as a few dollars, paid back to creditors will keep their good name intact. Some come from countries so poor they are used to repaying creditors with livestock or other nonmonetary goods.
"In their countries, if they tell a creditor, 'I'm sick this month, I cannot pay it,' it's OK," Vila said. But in general, she said, "we know that the Hispanic community is totally unaware of what credit is."
Two public-service announcements featuring entertainer Vicki Carr and Spanish-language soap-opera star Manuel Lopez Ochoa are being broadcast on KMEX-TV Channel 34, KWHY-TV Channel 22 and KVEA-TV Channel 52.
So far, the CCCS has raised slightly more than $200,000 to keep the commercials running for two months. Its goal at the moment is to raise at least $500,000 to maintain the program, Stroth said. Rep. Torres added that good credit among Latinos is "a critical issue not only in the community, but in the state as well."
"It is important that these consumers know how to deal with credit," said Torres. "It is in [the financial institutions'] best interest to educate the Latino community."