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The Unbanked

Little Village's Second Federal courted the Mexican community, reaping the benefits and revolutionizing the banking industry.

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In January 2001 a meeting was held in a small savings and loan in Little Village that would change the way U.S. banks dealt with undocumented immigrants who wanted to send money home to their families. Being in the country without papers, the immigrants had no social security numbers and therefore couldn't open bank accounts. So they usually relied on money orders and wire services--which cost $20 or more for every $300 sent home.

A local immigrant group, the International Coalition of Mexicans Abroad, thought it had a fairer alternative. In 1996 the IRS had come up with a taxpayer number, the ITIN (individual tax identification number), that was available to anyone working in the United States, regardless of legal status. Around the same time the Mexican consulate started issuing photo ID cards to Mexican citizens living in the U.S. Coalition members thought they might be able to persuade banks to allow illegal immigrants to open accounts if they had both forms of ID.

Ten banks turned down the idea. "They didn't believe in customers without legal papers," says Juan Matus, a coalition member. But Little Village's tiny Second Federal Savings, most of whose customers are Mexican, was interested. Two months after bank officials met with the coalition, Second Federal was opening bank accounts for anyone with an ITIN and a Mexican consulate ID card. It issued these new customers ATM cards that it called Amigo cards--one for the account holder, the other for his family back in Mexico. The family could use the card to withdraw up to $400 at a time, and each withdrawal cost at most $3.

It was a simple idea. Many legal immigrants had been using ATM cards like this for years, but no one had found a way for illegal immigrants to use them. Once Second Federal started making it possible, other banks across the country picked up the concept. Last November, Wells Fargo announced that it would accept the consulate card and ITIN as valid ID for opening an account; it recently announced that it had signed up 30,000 new customers that way. Citibank, Fifth Third Bank, Harris Bank, Bank One, U.S. Bank, Union Bank of California, Georgia's Sun Trust, and many more, including 30 banks in the Chicago area, now accept the IDs.

Second Federal, with its five branches, is a rare example of a community bank that ignored all the feverish consolidation going on around it and refused to merge with a large, faceless chain or expand into the suburbs. Instead it remained independent and stuck with its neighborhood, even as the neighborhood was changing.

The bank was started by Czech and Polish businessmen in 1882, shortly after the Chicago Fire, and it grew as the neighborhood became one of the great Eastern European enclaves in the U.S. Waves of Czechs, Lithuanians, and Poles used the neighborhood to move up. They would arrive in Pilsen and eventually buy a house around 26th Street, often with financing from Second Federal.

The savings and loan sponsored Czech and Polish dances, and all of its tellers spoke at least one of those languages. On the street "you would hear mainly Bohemian or Slovak or Czech or Polish," says John Ondrus, a Czech immigrant who owned a shop that made down comforters on 26th Street and who has served on Second Federal's board of directors since 1957. "If a woman came into the store and even though she spoke English, if the sales clerk didn't know Czech she would get insulted. You stayed with your ethnic group. When you came from the old country they had certain neighborhoods and certain towns you went to because you knew people."

But by the late 1960s the older Eastern Europeans were dying or retiring to the suburbs, and their children were leaving the enclave. Businesses on 26th Street began folding.

In the 70s the local chamber of commerce named the area Little Village in a desperate attempt to create a small town atmosphere. But the area was already a ghost town. Businesses had been boarded up. Fires had gutted many homes, and others were poorly maintained. Then large numbers of Mexicans started moving in, and by the late 70s Little Village was becoming La Villita.

Every local bank had already followed its Eastern European clients to the suburbs or had been sold--except Second Federal. Mark Doyle, who joined the bank in 1977 and has been its president since 1992, says the savings and loan was somewhat sleepy and inertia kept it where it was. And it wasn't publicly owned, so no stockholders had to be satisfied. "There was no reason to move," Ondrus says. "We understood that [the Mexicans] were immigrants like we were, like our folks were. If you treated them right you got a first-time customer. We picked up the Mexican clientele as we were losing the Czechs and Polish. The type of business we did didn't change over the years, but the people changed nationalities."

During these years Doyle tried to come up with ways to attract more Mexicans, many of whom were suspicious of and felt intimidated by banks. Second Federal began by offering customers free services. It became an agent for Commonwealth Edison, even stocking light bulbs to give to customers who were eligible for the utility's four-bulbs-a-month program. Later it let customers pay their phone and gas bills at its branches, as well as buy car-license stickers and CTA passes.

After Doyle became president he and his managers quickly decided that Second Federal would actively seek only Mexican clients. It was a daring move. Today many banks want them as customers, but at the time few were interested. Doyle and his managers also decided that their bank would begin opening on Sundays, since many customers worked six days a week. And they decided that all tellers would speak Spanish. "You can't have all Polish people working there and think you're going to get Mexican clients," says Doyle, adding, "We pounded our stake in. A lot of banks ride the fence. In this community you can't do that. You're either there or you're not."

By 1993 Second Federal had closed two branches in Anglo neighborhoods and built a new one in Cicero, which was then 40 percent Mexican (it's now 80 percent Mexican). The branch--at 4811 W. Cermak, the address of Al Capone's most notorious nightclub--was in a war zone, an area with burned-out buildings, drug addicts, and prostitutes. The few businesses still on the street were struggling. The day before construction began, two men were found on the lot, dead of overdoses. But Doyle saw recovery--led by Mexican immigrants--coming to the area, just as it was coming to Little Village.

After the branch opened, all Second Federal locations began flying the Mexican flag, which enraged many white residents of Cicero. Town president Betty Loren-Maltese and the town's trustees wrote Doyle demanding that the flag be removed. One man called the bank and said he'd shoot the first person who walked into the branch if the flag wasn't taken down. (The FBI investigated the threat, though it never caught the guy.) "A lot of people say we did it for business," says Doyle. "That's not a bad reason, but we do it out of respect for the community." The Mexican flag still flies over the Cicero branch. And on Mexican Independence Day it now flies even at Cicero's city hall.

In 1996 Doyle hired Matthew Brophy, who'd once been pastor of Saint Anthony's Catholic Church in Cicero, to underwrite loans and help improve the bank's relationship with the community. Brophy was bilingual and had held the first masses in Spanish at Saint Anthony's. In the late 80s he'd also helped launch the first Hispanic chamber of commerce in Cicero and the Interfaith Leadership Project, which lobbied city hall to, for example, publish its budget for the first time and improve flood control in Latino neighborhoods.

Brophy has helped Second Federal become a leader in attracting the "unbanked"--who include welfare and social security recipients in addition to immigrants--all of whom are on the outskirts of the U.S. economy and tend to distrust banks or be unaware of their benefits.

No one knows how many unbanked people exist, though the Federal Deposit Insurance Corporation estimates that they make up 10 to 13 percent of U.S. households. Yet no one doubts that they're moving a lot of money around. Latin American immigrants in the U.S. sent home a total of $23 billion last year--$9 billion to Mexico alone--much of it not through banks but expensive wire transfers and money orders.

As competition among regional banks has heated up, more and more institutions have started seeking potential customers among groups they once happily ignored, including the unbanked. "They have been attractive as customers forever," says Andrew Erlich, a minority-marketing consultant. "But because [banks] have focused on the sort of Donna Reed customers, they have overlooked these people. The unbanked have done their banking and paid a lot of money at check-cashing and pawn shops and finance companies. [Bankers] have started to wake up to the fact that they've been blind to these communities. You can't be a player and survive if you're not sensitive to this."

To win the unbanked as customers, banks are having to change the way they do business. They can't hope that the unbanked will come to them. They can't rely on signs in the window in Spanish or Chinese or on ads in ethnic papers. They're having to make personal contact through outreach programs and services, such as hiring more bilingual tellers who can help customers fill out deposit slips.

"Banks have wanted to back away from person-to-person service," says Erlich. "They've looked at on-line banking, mechanization, as the solution to everything. We're saying these customers are requiring even more attention. In other words, to attract the unbanked, chain banks may have to become more like Second Federal rather than the other way around." Second Federal even holds a Christmas posada celebration at four of its branches each year, and its parking lot is frequently used for Mexican fairs. And it's become a leading sponsor of Mexican concerts and dances.

Ironically, the Amigo card hasn't brought Second Federal much business so far--only a few hundred accounts. Yet it started a trend, and the opportunity to open accounts at many banks is one reason Mexican consulates around the country are now besieged by undocumented immigrants applying for ID cards. The line at the consulate at 300 N. Michigan sometimes stretches all the way across the Chicago River. In mid-July the Cicero branch let the Mexican consulate use its parking lot, and people who wanted the card began lining up at 3 AM. Second Federal recently applied to the IRS to be allowed to issue ITINs itself.

The furniture in Second Federal's main office, at 26th and Pulaski, is decades old. There are 18 teller windows, and none of the tellers wears a uniform or a suit. Loan officers' desks are cluttered with stacks of files that lean precariously. Doyle believes that working people feel more at home in a place like this than in "an environment where everything is crispy clean and the tellers all look like machines."

Doyle, who is soon to be married to a Mexican woman, makes frequent trips to Mexico and attends Mexican rodeos in Joliet and Kankakee. He talks about finding a way to open a Second Federal branch in Guadalajara. "I'd certainly never want to work in a Michigan Avenue Loop location," he says. "Here it's almost like going on vacation. You come down 26th Street, it's almost like going to Mexico City. On a day like this--when it's hot and muggy, and the buses are coming up and down, and you hear La Ley radio station, mariachi banda, music on the street, and people selling paletas--it's a very festive environment. The whole summer is like that."

No building on 26th Street is boarded up anymore. No building is even for sale. Today the main problem is congestion. The street is now a regional shopping center for Mexicans who drive in from Iowa, Wisconsin, Indiana, and Michigan. Last year, according to the Illinois Department of Commerce, $850 million worth of goods and services were sold on 26th Street, making it one of the busiest shopping districts in the city. Cermak Road too is booming with robust Mexican businesses.

Like the Eastern Europeans before them, the Mexicans have used Little Village to move up. "They started with 18th Street," says John Ondrus. "They upgraded and went to 26th Street. Now they're moving west." And later this month Second Federal will open another branch, this one in Aurora. This time it's following its clients to the suburbs.

Art accompanying story in printed newspaper (not available in this archive): photos/Jim Newberry.

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