SARASOTA, FL — One Florida city has teamed up with a local credit union to offer banking services to some residents who might not otherwise qualify for a traditional bank account, car loan or small-business loan.
“We’re not just talking about low-income individuals,” said Rowena Elliott, redevelopment specialist for the city of Sarasota. “They could be seniors as well as those who are on a very, very fixed income.”
The Access to Financial Services program is set to launch Feb. 20 under a partnership between the city of 57,000 and Manatee Community Federal Credit Union, which is certified by the U.S. Treasury to offer specialized credit and financial services to underserved communities.
“We’re focusing on those areas with a high concentration of low-to-moderate income, unbanked and underbanked individuals,” credit union President Sherod Halliburton told Patch.
Halliburton said $600,000 in loan money is available for Sarasota residents to buy reliable used cars or start small businesses that could grow into larger ones.
“Yes, we want to give people access to reliable transportation,” Halliburton said. “Yes, we want to grow their credit score. But there are some people that it’s as simple as, ‘Hey, I need a debit card, and there is not a financial institution that will provide me with that.'”
The city’s Elliott agreed that some city residents have been unable to qualify for a traditional bank account even though they might otherwise be considered middle class based on their earnings.
“They don’t know where to turn,” she said. “The first thing that you hear is, ‘No, you’re denied, you’re not qualified, but there are no programs to help me to get qualified to have better credit.'”
As a result, some people have been forced to take out auto loans with exorbitant interest rates for cars that are not reliable.
“They look pretty on the outside, but the heart of them — they are no good,” she said of the vehicles. “They break down after the first two weeks, and there goes a paycheck. There goes two paychecks.”
Sarasota residents will now be able to take advantage of the Reliable Ride component of the banking program, which is expected to be the largest component.
“Basically with this program, that would help them to get certified used vehicles that are maintenance-free for the most part,” Elliott said. “These accounts that they’ll open, they’ll have their direct deposits. Their car payments will come out every month when their direct deposit goes in.”
The average car loan will be about $12,000. City officials agreed to set aside $60,000 to cover defaults that exceed 10 percent of the total funds available.
“We have analyzed the historical default rates for our high-risk borrowers,” Halliburton said. “We’ve determined that our high-risk borrowers default at roughly a rate of 10 percent of the loan volume.”
As participants make timely car payments, the loans will help them build credit. They’ll hopefully also save money on car maintenance through the included maintenance package.
“They can put their money in the bank, and they don’t have to spend all their money on a car,” Elliott said. “They can spend a portion of their money for a small down payment, which could be $500 up to $1,000, and then walk away with a good used car.”
An open house is planned for 4 to 8 p.m. Feb. 20 so residents can learn more about the program. The event will take place at the Robert L. Taylor Community Complex in Sarasota at 1845 34th St. The city and credit union will also host an all-day car sale March 14 at the same location.
Residents will be able to browse certified, pre-owned vehicles from reputable area car dealers and work with the credit union’s auto adviser to negotiate a deal with a low-cost warranty and manageable monthly payments.
Some of the participants are likely to be those who were hit hard by the 2008 recession and never regained their financial footing.
“There are those people whose lives were challenging before 2008 and lives were challenging after 2008,” Halliburton said. “There are those people whose lives went into a tailspin because of a downturn in the economy. We welcome all of the above.”
Information about the Access to Financial Services program is available from Elliott at 941-263-6284.