CREDIT UNION TRIES TO WEAN FOLKS FROM CHECK CASHERS.

Byline: Evan Pondel Staff Writer

PACOIMA - Roberto Barragan isn't counting on another check-cashing store to improve access to capital in Pacoima these days.

For every bank in the region, there are approximately seven check-cashing stores that often charge customers a 15 percent processing fee. The anonymity of such stores is appealing to those who fear rejection from a bank. But with only two banks servicing a community of approximately 200,000, there are few alternatives for a population that consists of about 20 percent living below the poverty line.

``The problem is Pacoima has a hardened reputation that's hard to mitigate. When people think Pacoima, they think gang fights. But there is a lot of money to be made in the region,'' said Barragan, the Valley Economic Development Center's director, who is attempting to establish a credit union in the area.

A swathe of Van Nuys Boulevard that cuts through Pacoima reveals the region's lack of banking services. The facades of at least a half a dozen check-cashing stores are rife with bright neon signs, offering a variety of services including ``envios a Mexico'' - money wiring to Mexico. Payday loans are another popular item, enabling a customer to receive an immediate loan of up to $300 in cash provided they pay about $45 in interest. Several states have outlawed these loans, but California passed legislation in 1997 that maintains the practice.

Though the check-cashing industry has flourished in recent years, Barragan is bent on creating an alternative in Pacoima. To do that, he and City Council President Alex Padilla envision opening a credit union that would provide low-interest small business loans for the community.

So far, the proposed credit union has generated an asset base of approximately $350,000. ``This has been a challenge, and things are just starting to come together,'' Padilla said. Even so, the National Credit Union Administration has yet to approve a business plan that Barragan submitted six months ago.

``The NCUA was concerned about the viability of a credit union that focuses on small business lending. I don't think they are too eager for us to do that right away,'' Barragan said. ``But there is a good chance we will receive approval, and I expect to hear back from them any day now.''

Wescom Credit Union, a consultant to the VEDC and member of NCUA, is confident about the approval of a community-based credit union in Pacoima. ``The VEDC has a good track record and a great management team,'' said Joe Schaeffer, senior vice president of planning and development for Wescom. ``They just have to show profitability because if they don't get the deposits, they won't receive the loan growth.''

For most Pacoima residents, the lack of banking services is a costly inconvenience. It requires driving several miles to deposit a check or even access an ATM machine. In a two-mile radius of Pacoima's commercial epicenter, there is one bank-operated ATM machine. Natalia Alvarez, 53, said if banks only realized the demand for their services, she and others wouldn't have to travel several miles in Los Angeles County for something as essential as money.

``But even if there are more banks, many people don't understand what their options are,'' said Alvarez, who sends money to her family in Mexico via a check-cashing store in Pacoima.

A study conducted by the AARP found a definite relationship between the location of payday lenders coupled with the ethnicity and average income of their surrounding communities. Almost 60 percent of African-Americans, 49 percent of Latinos and about a third of Californians live within a mile of a payday lender. Of those, the study said 42 percent have household incomes of less than $25,000.

The dearth of banking services is only worsened by a language barrier. The subject of money is almost always difficult to talk about, and when ``you have to walk into a formal setting like a bank and discuss your savings, it's not that easy,'' Alvarez said.

Of the two banks in Pacoima, both hang signs in Spanish about their products. A Citibank branch posts signs that read ``Envio dinero a Mexico por solo $5'' - which translates to ``send money to Mexico for only $5.'' The nearby Wells Fargo branch also wires money to Mexico. But the bank doesn't require customers to have an account.

Neal Dudovitz, executive director of Neighborhood Legal Services, said some banks are beginning to act more like check-cashing stores in certain instances. And instead of bridging the gap between poor and middle class, a bank functioning as a check-cashing store actually increases the divide.

``It keeps people outside the economic mainstream, and it doesn't encourage people to open bank accounts,'' Dudovitz said. ``Everyone in Pacoima ought to have a bank account.''

To encourage the opening of accounts, many banks began accepting matricula cards issued by Mexican consulates as valid forms of identification. But most banks still require either a Social Security number, tax identification number or valid drivers' license as a primary form of identification.

The Citibank branch in Pacoima turns away about four people a week for not having appropriate identification. ``Sometimes you just don't know who you are serving,'' said Alicia Espinoza, service officer at the branch. ``And we have to be careful because we are exposed to a lot of different crimes.''

Beyond the branch, San Francisco-based Wells Fargo is aggressively wooing more Spanish-speaking customers to its Web site. The bank now allows customers to apply for checking, savings, credit cards and money transfer services online. Bolstering Wells Fargo's cause, the bank cites research from Celent Communications Inc. that said Latinos' purchasing power is expected to register $900 billion by 2007, up from $581 billion in 2003. Latinos also represent one of the fastest-growing segments of U.S. households, expected to increase to 11.9 million from 9.3 million by 2010, according to the U.S. Census.

In addition to serving a population in need, wire transfer fees associated with the Latino market have proven lucrative for many banks. A report by Inter-American Development Bank said remittance payments to Latin American and the Caribbean topped $32 billion in 2002, up from $23 billion in 2001.

The decor at Wells Fargo in Pacoima certainly complements those numbers. A mural that encompasses a large wall on the bank's interior draws references between Wells Fargo and Mexico. ``We try to create a welcoming environment here. Some people come from communities where they don't trust banks, but we are trying to educate the community,'' said Steven Contreraz, the branch manager who opened Wells Fargo's Pacoima location a year ago.

Evan Pondel, [phone]

evan.pondel(at)dailynews.com

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A credit union could offer services Pacoima residents would accept, that banks and check cashers don't make attractive, says Roberto Barragan, who's trying to form a local credit union.

Hans Gutknecht/Staff Photographer