AACUC Meeting Coverage: Panelists Address Myths Around ITIN Lending

SNELLVILLE, Ga.— Individual Tax Identification Number (ITIN) lending not only benefits immigrants, it’s also good business, say experts who note that despite perceptions, the loans actually see very low delinquencies.

What often gets in the way of more credit unions making these loans are those types of “myths,” according to a panel of experts speaking at the African American Credit Union Coalition’s virtual annual meeting.

ITIN loans are for people who are not eligible for Social Security numbers, often undocumented immigrants. ITIN's are issued to both resident and nonresident aliens for tax-reporting purposes.

A big myth, explained John Wilkening, chief retail officer at the $893-million Notre Dame CU in Notre Dame, Ind., which has an ITIN portfolio of $250 million, is the loans are high risk.

“I will tell you that these members pay us back,” Wilkening said.

He emphasized many credit unions fear not only will members who receive an ITIN loan default, but there is the additional concern over immigrants returning to their homeland and turning their backs on their obligations to the credit union.

“That is not happening within our ITIN portfolio,” he said. “These borrowers are trying to become part of our society in the U.S., and they are not running. These folks have so much honor, they are the salt of the earth, and it’s one of the most rock-solid loans you can make.”

More Misconceptions

Vanessa Kuduk, vice president of lending and Hispanic outreach at Members Credit Union, said thinking ITIN loans largely for a certain group of borrowers is not true.

“Thinking these are just for Latinos, that's a myth,” said Kuduk, who came to the U.S. herself years ago as an illegal immigrant.

“There is also this inaccurate perception that immigrants don't pay taxes, they do,” Kuduk said. “And I know there are many documented Americans that don’t pay taxes.”

Those aren’t the only misconceptions, according to panelists. Another such myth is that assuming the data reported by the credit bureaus is all the same when it comes to the use of ITINs for purposes of checking credit, said Mario Vega, consumer lending manager

at $238-million Guadalupe Credit Union in Sante Fe, N.M.

“When we first started making ITIN loans we used TransUnion,” Vega explained. “And this really became a matter of trial and error.”

Vega said the credit union discovered when it switched to Equifax it found a difference in the data when it comes to accepting ITINs.

“When we switched to Equifax we then were able to accommodate our entire membership,” he said. “What we have found is that Equifax is the best credit bureau service provider to use if you want to start ITIN lending.”

The Rewards

Outside of myth busting, the panel told the AACUC audience that accepting members with ITINs is rewarding for both the members and the credit union, and it builds lasting, profitable relationships.

Kuduk said Members Credit Union has not sought to simply build relationships with the immigrant communities it serves by “hanging out a sign.” Instead, it has benefitted from word of mouth from the borrowers themselves within their own communities.

“We build relationships within our communities,” she said. “We're going out and teaching financial literacy courses. We’re going to events and we're talking straight. We're explaining we need to bring these folks out of the darkness—it’s time in this nation for immigrants to come out of the shadows. We do a lot of communicating and calming of the people, and we sit down with them—often right at their kitchen tables. That is where we do our greatest work.”

Published article available here.