Bed-Stuy’s Credit Union Blues

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Central Brooklyn Federal Credit Union’s explosive growth since its creation in 1993 has made it one of the largest community development credit unions in the country. In retrospect, its expansion may have been too ambitious. Today, the federal government is running the credit union, and supporters are worried how the Bed-Stuy institution will fare until–if ever–it returns to the hands of its 5,000-plus members.

“We all feel [the credit union] really has a great purpose in the membership it serves. In that community, it’s one of the only lending institutions,” says Lesia Bullock, spokeswoman for the federal National Credit Union Administration. NCUA took the credit union into conservatorship last November, supplanting its elected board of directors and managing its business until problems are fixed or the doors are closed. “We have every belief that the credit union will be returned to the membership and stay open,” Bullock says. But she adds that it will take some time to ensure that the instituted changes are working.

Some of those changes worry the credit union’s leadership. “[NCUA administrators] are not equipped, prepared or trained to run a credit union,” says Mark Winston Griffith, chair of the credit union’s board of directors and executive director of the Central Brooklyn Partnership, which sponsored the credit union. (Full disclosure: Errol Louis, who along with Griffith co-founded Central Brooklyn, left the credit union last May and is now with City Limits’ sister institute, the Center for an Urban Future.)

Under conservatorship, the feds have sold the credit union’s building, curtailed its check-cashing service and ended Saturday hours. Although Central Brooklyn’s board had also considered making these moves, Griffith is concerned that the federal administrators aren’t giving the membership enough notice.

“There’s a sentiment that NCUA does not have an understanding of community development credit unions,” says Sarah Ludwig, executive director of the Neighborhood Economic Development Advocacy Project and a member of the Central Brooklyn Financial Freedom Campaign, an organization that sprang up to support the credit union. The group has organized the credit union members, started a media campaign and enlisted the support of local reps like state Senator Velmanette Montgomery and Congressman Major Owens.

NCUA has set up an advisory committee that includes Central Brooklyn board members and employees, but, according to Griffith, the NCUA staff doesn’t take the committee’s advice. For its part, NCUA says the advisory board is there solely to ensure the community is kept up to speed. “They’re not necessarily consulted and asked permission,” Bullock explains. “They have no official capacity.”

Central Brooklyn’s financial problems became apparent early last year. “They tried to have the best transaction services while being the most sympathetic of lenders and having the widest membership,” says Cliff Rosenthal, the executive director of the National Federation of Community Development Credit Unions (NFCDCU). “That’s a heavy agenda for a credit union.”

Citing high operating costs and problems with loan delinquency, NCUA’s board had voted last spring to take over the credit union. Central Brooklyn’s founders dodged that bullet. But even though they were able to raise $300,000, get technical support from the NFCDU and other credit unions, and set up a new business plan with a vastly improved bottom line, a second NCUA vote last fall went two to one in favor of conservatorship for Central Brooklyn.

So far, the credit union has kept the overwhelming majority of its members, although there are concerns that the changes–especially a new location–will drive depositors away. “It’s very unsettling,” says Lavern McDonald, a Central Brooklyn member who used a $10,000 loan from the credit union to buy her first home. “I know I’m insured, but I’m worried I’ll go there one morning and find a board over the door.”

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