Big role for church credit unions sought

The Rev. Garvin Warden of Greenwood Memorial United Methodist Church in Dorchester has financed two vehicles through New England United Methodist Federal Credit Union. (PAT GREENHOUSE/GLOBE STAFF)

You'd think a man of the cloth would make an ideal candidate for a bank loan.

Yet two decades ago, when the Rev. Garvin Warden wanted to borrow a few grand to pay off his credit card debt, the bank turned him down. That's when the Methodist minister joined New England United Methodist Federal Credit Union, founded in the Eisenhower era to help Methodist clergy buy cars to carry out their duties. Since then, Warden has financed two vehicles through NEUMFCU, which moved its headquarters from Massachusetts to Westbrook, Maine, last year.

Today, Warden, the new pastor at Greenwood Memorial United Methodist Church in Dorchester, is not only a refugee from banks - "I closed my last checking account at a bank in 2002" - but an enthusiastic advocate for credit unions, especially for low-income people who are the target audience for subprime mortgage lenders and high-interest payday lenders.

"The last church I served, I think there were people who were on the verge of losing their homes" because their mortgage interest ballooned unaffordably, he said.

He said he has known too many people who've gone to payday lenders, which offer speedy, short-term loans but typically demand 300 percent annualized interest or more.

At NEUMFCU, the interest on short-term loans is no more than 17 percent, according to CEO Shelly Page.

The rise of such lenders, along with the fall of the subprime mortgage market, have some advocates for the needy looking to history and suggesting that churches could play a role.

A century ago, the nation's first credit union was opened by a Catholic pastor in Manchester, N.H., whose mill working parishioners needed credit and savings that banks balked at offering them. Other churches and denominations followed suit, often expanding later to include nonparishioners.

Some began humbly. The shoe factory workers who started St. Mary's Credit Union in Marlborough in 1913 pooled their money and kept it in a shoebox to buy winter coal, said Tom Wellen, who is the third generation of his family to serve on the board of the credit union. Several families trace their membership back two or three generations, he said.

The church was closed by the Archdiocese of Boston some years ago, but the credit union its pastor helped start lives on.

Membership today is open to residents or workers in Middlesex and Worcester counties and their families. The credit union has $500 million in assets and about 30,000 members, Wellen said.

Barbara Dafoe Whitehead, an Amherst writer and researcher, wrote a recent article on debt for The American Interest, a public affairs quarterly. She wrote about an "antithrift industry" of subprime mortgages, payday lenders, state lotteries, and aggressive credit card companies that encourage people to borrow over their heads.

"Some blame individual greed and recklessness, and certainly human frailty and irresponsible choices are part of the story," Whitehead wrote. Yet few other consumer societies have citizens staggering under American-level debt loads, she said.

Her article coincided with a corroborating report announced in May by a consortium of think tanks and activists spearheaded by the New York-based Institute for American Values that calls for a national ad campaign promoting saving and thrift.

One consortium member, the National Federation of Community Development Credit Unions, which serves low- and moderate-income people, has one-third of its credit unions connected to faith-based organizations, said the federation's president, Clifford Rosenthal.

Payday lenders say that their typical loans are for two weeks and charge 15 percent interest; borrowers pay triple-digit annualized interest only if they repeatedly roll over a loan.

Payday interest rates compare favorably with bounced-check fees, credit card late fees, and other competitors' charges, industry officials say.

But Whitehead's essay said 56 percent of the industry's revenue comes from rollovers by customers who take out more than a dozen loans a year.

Her essay castigated an entire set of institutions, including but not limited to payday lenders, for encouraging imprudent behavior.

She proposed the creation of some kind of community institution with affordable credit and incentives to save.

Might churches spearhead this new thrust for thrift?

She wrote in an e-mail that churches anchor themselves in poor neighborhoods when other institutions flee, so they have the "commitment and connections" necessary to help.

Barack Obama's pledge to support faith-based initiatives if he wins the White House would be a shot in the arm to existing church credit unions, Whitehead said, "and might spur faith communities to form new ones."

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