No social security number? No problem: ITIN loans fill a gap. | Credit Union Journal

ByRichard C. Sloan

Mar 25, 2022

Federal Credit Union Notre-Dame in Notre Dame, Indiana, has 2,300 members out of a clientele of 60,000 who do not have a Social Security number.

Instead, these members use an Individual Taxpayer Identification Number, or ITIN, which the Internal Revenue Service issues to people regardless of their immigration status to help them meet their tax obligations. An ITIN can also be used to obtain banking services – if the bank or credit union allows it – and the largest share of loans to ITIN holders goes to Hispanic immigrants, according to the ITIN Loan Guide published by Inclusiv Network, an association of credit unions serving economically disadvantaged communities.

Between July 2020 and February 2022, Notre Dame FCU’s total loan balance for ITIN-holding members increased by 40% to $28 million, while current account balances for its ITIN-holding members increased. increased by 92% to nearly $20 million.

Major banks like Wells Fargo and US Bank also offer ITIN loans and related services, but this category is especially important for smaller institutions serving Hispanic communities. As an indication of the number of people eligible for ITIN loan programs, a January 2022 report by the Treasury Inspector General for Tax Administration stated that there were 5.4 million active ITINs as of January 1, 2021. and that as of December 31, 2020, the IRS had issued 25.1 million ITINs since the program’s inception in 1996.

“The Hispanic market is good business,” said Tom Gryp, president and CEO of Notre Dame FCU. “We are not in this market to make tons of money, but to be sustainable and profitable.”

Notre Dame Federal Credit Union has 2,300 members out of a customer base of 60,000 who do not have a Social Security number. This group, which uses ITINs to open an account, has $28 million in loan balances and nearly $20 million in checking account deposits.

Illiana Financial Credit Union in Calumet City, Illinois, grew its assets by 49% to $291 million in 2021 since starting its ITIN program in 2013. Over the same period, Illiana’s total loans grew 23% to $122 million, thanks to loans to ITIN-holding Members.

“We design all of our programs so that whatever we offer our Social Security Number holders, we also offer to our ITIN-holding members,” said Marisela Zambrano, director of business development at Illiana. “We don’t see any higher risk associated with ITIN loans compared to loans to Social Security number holders.”

Having an ITIN loan program is only part of the effort needed to better serve Hispanic communities, experts say. Providing financial education is essential if credit unions are to steer unbanked Hispanics away from predatory payday lenders with exorbitant interest rates, said Pablo DeFilippiexecutive vice president of Inclusiv Network based in New York.

“Our research found that credit unions can provide loans to Hispanics within regulatory interest rate parameters that have sufficient spreads, whereas payday lenders charge 500%,” he said. .

Juntos Avanzamos d’Inclusiv [together we advance] The financial inclusion program encourages credit unions serving the Hispanic community to accept ITIN numbers and Matrícula consular ID cards, which are issued by Mexican consulates. Currently, 123 credit unions have received the Juntos Avanzamos d’Inclusiv designation.

in the community

In 2010, Hispanic community leaders in Toledo, Ohio approached Sue Cuevas, a former corporate banker, to start a credit union. Initially working from his car, Cuevas installed the Nueva Esperanza [new hope] Community Credit Union, of which she is CEO.

As part of her outreach, Cuevas travels to local Hispanic festivals and works with Hispanic organizations to provide financial education. “I go to schools to explain to parents why they and their children need savings accounts,” she said.

In addition to accepting ITINs, Nueva Esperanza reviews green cards, passports, Matrícula Consular cards and international driver’s licenses, Cuevas said. It also reviews alternative credit data, such as records from landlords and utility companies. “We can put members on a small loan for 12 months, and if they pay it back, we can offer more credit,” Cuevas said.

Lenders also need to hire Spanish speakers from the Hispanic community in order to attract Hispanics into their lobbies, said Maria J. Martinez, president and CEO of Del Rio, Texas, Border Federal Credit Union.

“People like to do business in environments where the staff looks like them and speaks their language,” she said. “In addition, credit unions need to provide career progression for Hispanic employees and promote Hispanics into leadership roles so they can become role models and inspire other Hispanics to work in credit unions.”

Fintechs enter the scene

Fintechs such as Miami-based Fortú, Austin-based Tend in Texas, and Los Angeles-based Welcome Tech are using apps to reach tech savvy members of Hispanic communities.

Welcome Tech’s bilingual platform SABEResPODER (Knowledge is Power) offers a mobile wallet linked to a debit card and bank account provided by Green Dot Bank. It examines ITINs and Matrícula Consular cards during its integration.

“We are positioning ourselves as a provider of educational resources, not just bank accounts,” said Amir Hemmat, CEO of Welcome Tech, which received $35 million in an April 2021 Series B funding round co -led by TTV Capital, Owl Ventures and SoftBank. “Our entry point to the market is the first generation of foreign-born households, and then we can serve their entire multi-generational family. Over 70% of our account holders use us as their primary bank account provider.”

Welcome Tech plans to offer additional financial products such as credit cards and remittances.

“We generate first-party data from SABEResPODER members, which we can use as part of our subscription model,” Hemmat said.

Even with advances in technology, a physical presence in a lender’s local community is important, DeFilippi said.

“The advantage of credit unions over fintechs and large financial institutions is that they can leverage their local vibe to develop a relationship of trust with Hispanics,” he said.