Recognizing the growing challenges that plague 1099 workers, one credit union is deepening its role as a community development financial institution and expanding lending opportunities to this audience.
Telhio Credit Union in Columbus, Ohio,
The initiative was developed in partnership with
Jessica Bing, chief communications officer for the $1.4 billion-asset Telhio, explained how the credit union's certification as a CDFI — combined with the growing percentage of 1099 workers across the U.S. and in the surrounding areas — fueled the need for a program bridging the gap between Telhio and underserved locals.
"With the opportunity for our members to take advantage of what were historically low loan rates, particularly when buying and refinancing homes, there were several members in our community who could not be served with the lending products they need because of the lack of access to credit. … This lack of access comes from outdated, formulaic methods of calculating income that made access to loans and credit a challenge for gig and 1099 workers," Bing said.
Consumers can link their deposit accounts to the Steady app, which compiles transactional data and helps the user verify the origin of funds — resulting in a singular PDF containing all the vital information needed during the underwriting process. In turn, financial institutions such as Telhio that offer services suited for 1099 workers would be identified to the consumer as an option for financial services.
Lenders concerned about the potential risks associated with gig workers could be overlooking benefits of working with this community as well, experts say.
Adam Roseman, co-founder and chief executive of Steady, highlighted how nonstandard workers with multiple channels of income are more financially resilient compared to a traditional W2 employee with a single employer.
At financial institutions, "you're checking two boxes. One is obviously meeting their CDFI requirements and being able to actually demonstrate meaningful impact, but at the same time, they're increasing their total addressable market," Roseman said. "In terms of the consistency of so many of these workers' income and their ability to withstand income shock, I would put them up against anybody, because their whole day in and day out is a fight."
But despite the resiliency of gig workers, many wrestle with the added difficulty of accounting for taxes.
Many self-employed workers who end up in trouble with the Internal Revenue Service were less disciplined in bookkeeping and unprepared to account for how much they were required for withholding, according to Tom O'Saben, director of tax content and government relations at the National Association of Tax Professionals.
"When you or I get a paycheck, we've had federal tax withheld, we've had Social Security and Medicare withheld and we've had state tax withheld. … When you're a 1099 worker, no one is doing that for you [and] in fact, you've got to develop a discipline to do that for yourself," O'Saben said.
These fears of becoming indebted to the IRS and facing severe penalties or time in prison have led many to
As the needs of nonstandard workers in the credit union's fields of membership continue to evolve, Telhio aims to further expand its reach in underserved communities.
"Telhio's mission is to provide services to all," Bing said, and as a CDFI, Telhio "continues to develop its strategy to serve those who are challenged by the traditional practices of financial institutions. … The needs of our community are not one-size-fits-all."
