Hill District Federal Credit Union
It’s not uncommon, on the first of the month, to see a line wrapped around Hill District Federal Credit Union (HDFCU) in the morning. Located in the Hill District section of the city of Pittsburgh, Pennsylvania, the credit union has a committed membership based on trust—something that longtime Treasurer and CEO Richard Witherspoon says is crucial to their success.
A history rooted in the search for racial equity
In 1968, the assassination of Martin Luther King, Jr., rocked the nation. Waves of civil disturbance swept the country, and many African American communities were heavily impacted by an outpouring of wide-ranging emotions.
“At the time across the country, inner cities were ablaze,” explains Witherspoon. “When the dust settled, traditional financial institutions were reluctant to come into neighborhoods like this.”
It was therefore in 1970 when Mary Walker decided that if financial institutions weren’t going to come to them, they would create their own. She founded HDFCU and served as its CEO for over 20 years, when Witherspoon took over.
Walker, who was also a founding board member of Inclusiv—or the National Federation of Community Development Credit Unions, as it was known back then—didn’t have much credit union experience but quickly learned the business. She began soliciting the residents in the community to become members—asking for only 25 cents per account.
“There was a huge trust factor at the time. But she persevered, and people bought into it,” says Witherspoon.
Continuing the community development tradition
As a community development credit union, HDFCU still holds the same values, mission, compassion, understanding and empathy for those they serve now as they did back in 1970.
“That’s just extremely rare in this go-go, make-all-the-money-you-can society,” Witherspoon says. “My tenure and calling here, it’s still straightforward, still the same as it’s been since 1988.”
While their dedication and approach are still the same, unfortunately so is the racial wealth disparity. The HDFCU community is 90% African American with a medium income of $20,000.
So, what does the credit union do to address this issue? Witherspoon says the answer is simple: They build people up.
“We give them a coat of Teflon by way of credit scores in the 700 target, savings deposits in the thousands, and encouragement—we build their confidence,” he explains. “The key is building people up in their financial health.”
When people feel more optimistic, and when they can see their financial health improving, Witherspoon says that is when the community begins to trust the credit union and prosper.
“In a low-income community, trust from the outside is hard to come by,” says Witherspoon. “It’s not a given—you have to earn it. We’ve been able to get that and to grow that trust factor.”
With a possible field of membership around 13,000, HDFCU has over 3,600 members.
“As far as credit unions go, that’s a good penetration. That’s because of trust.”
Global pandemic leads to program design
If there’s one thing Witherspoon and his team excel at, it’s designing new products and services. When the pandemic hit, jobs were lost and hours were cut in the HDFCU community, bringing about a need for a different kind of assistance.
Witherspoon led his team in creating the Family Protection Plan. With the support of Pittsburgh’s Benter Foundation, the credit union constructed a zero-percent-interest-rate loan package. In this program, the individual borrows $1,500—with $500 going directly to a savings account and $1,000 into their pocket to help with expenses.
The first payment is due in 90 days with the hopes that the borrower will have returned to work by then. The loan lasts for 18 months and once it’s repaid, they have access to the $500 that was put into savings. If the loan goes to default, HDFCU has an agreement that the money comes out of the foundation’s deposit—therefore creating no risk for the credit union.
The loan program provides for a maximum of 100 individuals. So far, they are halfway through that number.
Overall, what HDFCU has witnessed is surprising: While the impact of the pandemic on people’s livelihood was great, the credit union’s delinquency remained the same.
“You would expect under those circumstances to see a spike in loan losses, but it didn’t happen,” he says. “Again, that’s because of trust and loyalty.”
Looking at the whole picture of a person
Unlike traditional financial institutions, HDFCU looks behind the credit score to make loan determinations.
“Through experience I’ve learned that if people are working and have good character but have a low credit score, it’s usually because of job loss at some point, a breakup in the family or illness,” says Witherspoon. “One of those three things usually impacts someone of good character and then their credit deteriorates. We take that into consideration—when did it happen, how have they been doing since then? We assess all of that.”
Witherspoon describes instances where, upon approving loans, members have cried because they viewed HDFCU as their last hope.
“I have someone on my desk right now whose credit score is 560 but who needs to have their furnace repaired—so we will do that loan for sure,” he explains.
The legacy of home ownership
Witherspoon believes that an effective way to change the trajectory of lower-income families is through home ownership, which is why he has big plans for an HDFCU mortgage program. The credit union is projected to secure around $10 million in reserves before rolling out the new program in the coming months.
Witherspoon advises young families that instead of paying rent, they are better off taking on a 15-year mortgage—especially with today’s low interest rates.
“By the time their kids are ready for college, they will have mostly paid off their home,” he says. “Meanwhile, living in their own home gives kids a different outlook on life, a different mindset. They’re more confident.”
Parents who own homes create an inheritance for their children and a legacy for their family. It is, however, a slower process to building wealth than the instant gratification people assume comes with financial apps and other digital tools.
“If they take their time and are consistent, that’s much more beneficial in the long run,” explains Witherspoon. “There is a steep price to instant money. That’s microwave stuff. We are crockpot stuff. And food tastes much better in a crockpot.”