Instead, those members use an Individual Taxpayer Identification Number, or ITIN, which the Internal Revenue Service issues to people regardless of immigration status to allow them to 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
Between July 2020 and February 2022, Notre Dame FCU’s total loan balances for ITIN-holding members grew 40% to $28 million, while its ITIN-holding members’ checking account balances rose by 92% to nearly $20 million.
Large banks like Wells Fargo and U.S. Bank also offer ITIN loans and related services, but this category is especially important to 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 said that there were 5.4 million active ITINs as of Jan. 1, 2021, and that, as of Dec. 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, Notre Dame FCU’s president and CEO. “We’re in this market not to make tons of money, but to be sustainable.”
Illiana Financial Credit Union in Calumet City, Illinois, increased its assets by 49% to $291 million in 2021 from the start of its ITIN program in 2013. In the same period, Illiana’s total loans grew 23% to $122 million, driven by lending to ITIN-holding members.
“We design all our programs so that, whatever we offer to 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.”
The presence of an ITIN lending program is only part of the efforts necessary to better serve Hispanic communities, experts say. Providing financial education is critical if credit unions are to win unbanked Hispanics away from predatory payday lenders with exorbitant interest rates, said
“Our research has found that credit unions can make loans to Hispanics within the regulatory interest rate parameters which have sufficient margins, whereas payday lenders charge 500%,” he said.
Inclusiv’s Juntos Avanzamos [together we advance] financial inclusion program encourages credit unions serving the Hispanic community to accept ITINs and Matrícula Consular ID cards, which are issued by Mexican consulates. Currently, 123 credit unions have received Inclusiv’s Juntos Avanzamos 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 out of her car, Cuevas set up the Nueva Esperanza [new hope] Community Credit Union, of which she is CEO.
As part of her outreach, Cuevas goes to local Hispanic festivals and works with Hispanic organizations to provide financial education. “I go into schools to explain to parents why they and their children need savings accounts,” she said.
In addition to accepting ITINs, Nueva Esperanza looks at green cards, passports, Matrícula Consular cards and international driver's licenses, Cuevas said. It also looks at alternative credit data, such as records from landlords and utility companies. "We can put members on a small-dollar loan for 12 months and, if they repay it, we can offer more credit," Cuevas said.
Lenders also need to hire Spanish-speaking people from the Hispanic community in order to attract Hispanics into their lobbies, said Maria J. Martinez, president and CEO of Del Rio, Texas-based Border Federal Credit Union.
“People like to do business in environments where staff look like them and speak their language,” she said. “Also, credit unions need to offer career progression to Hispanic employees and promote Hispanics into leadership roles so they can become role models and inspire other Hispanics to work in credit unions.”
Fintechs step in
Fintechs such as Miami-based Fortú, Austin, Texas-based Tend and Los Angeles-based Welcome Tech use apps to reach
Welcome Tech’s bilingual SABEResPODER (Knowledge is Power) platform offers a mobile wallet linked to a debit card and bank account provided by Green Dot Bank. It looks at ITINs and Matrícula Consular cards in its onboarding.
“We position 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 point of market entry is first-generation, foreign-born householders, and we can then service their full multigenerational 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 the members of SABEResPODER, which we can use as part of our underwriting model,” Hemmat said.
Even with advancements in technology, a physical presence in a lender's local community is important, DeFilippi said.
“Credit unions’ advantage over fintechs and larger financial institutions is that they can leverage their local feel to develop a relationship of trust with Hispanics,” he said.
