Arkansas Credit Unions Focus on Customers

Pictured above: Rodney Showmar, Michele Beasley and Arlo Washington

Banks are an ubiquitous part of the American economy, consciousness and popular culture. They are constantly in the news, their apps are on our phones, and many are household names. But why should banks get all of the credit? They are hardly the only financial institutions around, nor are they the only ones who can take deposits and make loans. Arkansas is home to numerous credit unions that, while less well-known than many banks, are no less capable.

“From the outside looking in, there’s very little difference [between banks and credit unions] that you can tell from the outside,” said Rodney Showmar, president and CEO of Arkansas Federal Credit Union.

The Little Rock-based credit union is the largest in the state and has approximately $2.3 billion in assets. Like banks, AFCU offers checking and savings accounts, mortgages and other loans, and it also happens to be the largest auto lender in the state. But while its services are mostly the same, there are crucial differences at the foundational level. Banks have either private owners or stockholders in publicly held companies. Credit unions are financial cooperatives and their customers are members.

“The main difference between a credit union and a bank is simply the ownership structure,” Showmar said. “Credit unions are not for profit. Since all of the customers are the owner, all the customers get an equal share and an equal vote.”

The credit union dynamic creates a strong motivator to provide good customer service.

“Our leadership really emphasizes treating members just like you would your grandmother,” said Michele Beasley, vice president of consumer lending and marketing at Telcoe Federal Credit Union in Little Rock. “We don’t want quick answers given to anyone that calls or stops in; we want to actually listen to the story that’s being told and try to resolve it as though it were your grandmother on the phone.

“We’ve all had service at some company where you called once and didn’t get your issue resolved, so you had to call back two or three times and share your same story over and over. We’re really trying to create a culture and an environment where our employees are not order takers, but they’re truly trying to be problem solvers. That takes a very deep knowledge base that someone has to learn to be able to be that person.”

A common, though not universal, characteristic of credit unions is that they often serve a specific group or demographic. Many companies, for example, have credit unions as a benefit for their employees. Today, AFCU serves any Arkansan who would like to become a member, but it was originally founded as the Little Rock Air Base Federal Credit Union in 1956, exclusively serving the men and women of the base. It later expanded by merging with other credit unions that served specific groups, such as one for Arkansas state employees and another for federal employees.

Telcoe is another of the state’s largest credit unions and has approximately $449 million in assets and almost 23,000 members. It serves some 250 employers around the state who offer membership in Telcoe as a benefit, ranging from major hospitals and city governments to small businesses. Yet Telcoe began as an impromptu loan fund by the employees of Southwestern Bell Telephone Co.

“In 1950, employees of the Southwestern Bell Telephone here in Little Rock couldn’t get loans from banks,” Beasley said. “They literally walked around the office with a cigar box and made deposits, and they loaned it out to others to be able to buy a refrigerator or to pay the medical bills for a new baby that was being born. It grew from there to where we offer mortgage loans, car loans and checking accounts.”

Reminiscent of those community origins is the establishment of a much younger institution, People Trust Federal Credit Union, based in North Little Rock. The president and founder of People Trust, Arlo Washington, came from humble beginnings in a single parent home. His mother was a social worker striving to put her kids through college. She passed away two weeks before Washington graduated from high school. His mother had dreamed of owning a home but had lost faith in the financial system and federal resources that made buying a home a struggle.

“I ended up going to barber college when I was 19 years old,” Washington said. “By the time I was 20, I had my first barber shop. There’s a ‘pull yourself up by your own bootstraps’ type of story there because I didn’t know anything about credit, didn’t know anything about accessing capital from a bank or anything like that. But I did have a burning desire to be successful and to be able to provide a foundation not only for myself, but for my two younger sisters. I also wanted to be able to provide a resource for other aspiring entrepreneur barbers that were looking to build up a clientele.”

Washington’s business grew so swiftly that he had to establish the Washington Barber College in 2008 to fill the need for new workers. In addition to training, the college began a social program called People Trust, which provided services to students who needed child care, food and other forms of support, as well as giving free haircuts to homeless individuals which allowed students to work on real people instead of just mannequins.

At about the same time, the state government made strong efforts to crack down on predatory payday loans. This had the unfortunate side effect of creating credit deserts in communities where people lacked the credit scores or collateral to obtain loans from traditional banks, leading to further economic disparity.

“People started to go wherever they could to get help,” Washington said. “Some people went to loan sharks. Some people went to payday lenders online. Some went to merchant cash advances, but then there were community members who still wanted to do things face-to-face. They came to the barber college and started asking for small loans. So, in 2014, we changed our initiative from just being a community service organization to start providing financial products and services. That’s when the name changed from People Trust to People Trust Community Loan Fund.”

Thanks to grants from the state treasury and the Rockefeller Foundation, People Trust was able to get on its feet and invest in online software. That software put it in a perfect position to be a financial first responder when the pandemic hit, providing hundreds of loans and assisting small businesses with obtaining PPP loans. Afterward, many small businesses who had not been able to access PPP loans through their own banks decided they wanted to bank with People Trust, but the institute did not yet take deposits.

In September 2022, People Trust signed its community charter application with the National Credit Union Administration to become a minority depository institution. Today, People Trust has about 400 members with an asset size of more than $5.2 million. The organization is well-suited to respond to the needs of the people it is meant to serve because those people are its members and owners — those who are unbanked or underbanked and those who need a second chance after bad luck with the traditional financial system. Though People Trust does have a minority and low-income designation, anyone in Pulaski and Saline County is eligible to become a member, and Washington plans to expand into new markets where there is a need to be met.

“In Arkansas, credit unions really haven’t had a large exposure,” Showmar said. “Texas is a big credit union state. The East Coast and West Coast are big credit union marketplaces. Credit unions are more well-known. People know who they are, and they’re familiar with it.”

That lack of exposure comes largely from the small size of credit unions in Arkansas. AFCU is the state’s largest credit union, but still only ranks 11th amongst all other financial institutions in the state, and there are only five credit unions with assets of more than $100 million. Its relatively small size, however, does not leave AFCU lagging behind in what it can do for its members.

“I think sometimes [credit unions] get put in a category where people think we don’t have as much technology as, for instance, Bank of America and Wells Fargo, but we do. We have to,” Beasley said. “We have very modern apps that allow you to do all of the things you need to do regardless of the size of the institution. We know that’s what people want, and we make sure we have that.”

That technology does not just include matters of convenience like making deposits on your phone. To offer an app in the first place, it has to be secure. As financial institutions, even the smallest credit unions are subject to the same requirements as massive banks when it comes to protecting customers from fraud and other cybersecurity concerns, making up-to-date technology a matter of absolute necessity.

“A lot of times, when banks and credit unions are formed, they usually only have their physical presence, and that was about as far as their reach was,” Showmar said. “In today’s age with digital technology, you can reach far and wide. It’s the great equalizer. We’re at $2.3 billion, and we offer products, services and technology that rival some banks in the $50 to $100 billion range because we can do the same exact thing that they can do. We have all of the same tools that they have.

“I was just reading a story about one of our call center representatives who was helping out one of our members in Egypt. We have members in all 50 states and 22 foreign countries, and they’re still able to do business and handle all their financial affairs through Arkansas Federal because of the access that they have.”