Planned CU for Formerly Incarcerated Looking for Start-Up Capital

A nationwide non-profit group is aiming to launch a credit union for formerly incarcerated people as a means toward financial growth and education.

David Baumann


Apr 10



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David Baumann

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David Baumann

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De novo institution seeking to provide financial services and education, alternative to predatory lending.

The hurdles formerly incarcerated people face are daunting.

They need a job.

They need a driver’s license.

They need credit or a bank account.

Now, a nationwide non-profit group, the First Step Alliance, is trying to help the formerly incarcerated clear that last hurdle by establishing a credit union.

“There is a very strong correlation between having a bank account and re-incarceration,” explained Nancy Eiden, the founder and secretary of the non-profit, in an interview. Eiden, who also serves as a board member of the group, added, “The lack of financial resources is a contributing factor. The lack of access to financial services…and education is astounding.”

And so, Eiden, who has spent her career in the financial services industry, is working with Thomas O’Shea, the former CEO of Aspire Federal Credit Union, to help establish Diverge, the new credit union.

An Alternative to Predatory Lending

“Fresh Start safe and affordable products and services will be designed based on the unique circumstances of these individuals, helping them create a path to financial wellness, credit building opportunities, and long-term financial stability and economic mobility,” Diverge states on its website.

Eiden noted that there have been some efforts in the credit union industry to help formerly incarcerated people, but often, when they try to open a bank account, they do not have a valid driver’s license. And their names are “immediately flagged.”

The only identification they may have is a parole card, O’Shea said. And that may not be enough to open an account.

Predatory lenders often are the easiest way for these people to get loans, a situation, Eiden added, “That exacerbates the problems they already have.”

Financial Education

O’Shea noted reentry programs do attempt to help the formerly incarcerated, “But no one’s addressing the banking side,” and therefore, “There is a real need for financial education.”

This education needs to be part of that re-entry program, according to O’Shea. “There’s not a financial institution that is concentrating on the magnitude of the need,” he said, adding, “There’s a lot we can do within the credit union movement.”

What Services Will the Credit Union Provide?

Diverge intends to offer “Fresh Start Banking,” including low-cost, no-minimum checking accounts, saving accounts, certificates of deposits, direct deposit of paychecks and debit cards.

Members, who will gain membership if they are associated with the First Step Alliance, will be able to obtain access to their accounts at branches, shared branches with other credit unions, on-line and mobile banking, and an extensive fee-free ATM system.

Members also will be able to build their credit through secured credit cards, credit builder loans and small-dollar loans for emergency needs.

When Does the Credit Union Hope to Launch?

To provide those services, the credit union will need to create a unique onboarding process, O’Shea said. For instance, he asked, “How do we look at creditworthiness?”

Eiden said the NCUA has “blessed the concept” and approved the proposed field of membership.

The next steps are to rally the credit union community behind the effort and raise $2 million in capital. O’Shea said organizers have been meeting with officials from individual credit unions to aid in that effort.

While the two acknowledge there is still much work to be done, they anticipate the credit union will open for business about a year after the capital is raised.

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