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June 29, 2006
Sending Funds Home to Mexico Just Got Cheaper for Latino Community Credit Union Members
    by Bill Baue

The Durham, North Carolina-based community development credit union will charge a flat $3 fee, use the exchange rate set by the Fed, and allow recipients to set up accounts in Mexico.

While the US is embroiled in debate on the flow of immigrants, especially across the Mexican border, the flow of money across this border may help address at least some of the contentious issues. Latino Community Credit Union (LCCU), a Durham, North Carolina-based community development credit union (CDCU), launched a program earlier this month that lowers the cost and increases the effectiveness for its members sending remittances to Mexico.

LCCU became the first credit union to use the "Directo a México" program recently established by the Fed and the Central Bank of Mexico (Banxico) for transferring funds between the two countries through the Automated Clearinghouse (ACH) network. In collaboration with the BANSEFI (one of Mexico's largest banks) and its strategic partner L@ Red de la Gente, LCCU will charge a flat $3 fee for transferring any amount of money.

"We've been sending remittances across borders since we opened out doors in 2000," said Allison Yonas, LCCU's director of financial management. "What's novel about this new way of sending remittances is its lower cost, and also our ability to open accounts for the recipient in Mexico and send money account-to-account."

Whereas some commercial financial institutions generate profits on remittances by charging a high exchange rate, LCCU will protect its members' interests by charging the rate set by the Fed.

"The preferential foreign exchange rate applied by Directo a México is another key benefit to remittance senders because their loved ones in Mexico will receive more pesos for every dollar sent back home," said Elizabeth McQuerry, assistance vice president of the Fed's retail payments office.

LCCU's new remittance system stands to benefit not only its members' families, but also the broader social systems.

"If one of our members wants to send money to his mother, but she doesn't have an account in Mexico, he can open an account for her from here," said Ángel Romero, LCCU's marketing director. "This allows a lot of unbanked people in Mexico to be banked, so they can start saving and creating a credit history."

"When you start creating wealth in other countries, it creates stability there and gives less reason to migrate," Mr. Romero told "By charging less for remittances, we're helping stabilize some of the population--it doesn't mean we're going to solve the problem, because that's not our job as a financial institution, but we do think our new program has a positive effect in all senses."

While the new system clearly caters primarily to Mexican immigrants and their families, they are not the only ones who stand to benefit.

"There are growing pockets of retirement communities in Mexico formed by American citizens taking advantage of the lower cost of living, as well as the weather," explained Mr. Romero. "Having a system like this is really convenient to them, because they can send wires to themselves in Mexico."

While LCCU is one of the leading CDCU's targeting Latino populations, this is a growing segment of interest to many other CDCUs. Indeed, the National Federation of Community Development Credit Unions hosts two conventions annually--its annual meeting and a Latino conference. In its fourth year, this year's Latino conference was hosted in LCCU's hometown of Durham.

"There are community development credit unions that are not focused primarily on the Hispanic community, but they do want to serve it," said Mr. Romero.

Now that LCCU has set the precedent, these other CDCUs can follow its example and adopt the Directo a México program. In addition to spreading to other CDCUs, there is promise of this type of program spreading to other geographies.

"We hope that in the near future more countries will have the capacity to provide a similar product," said Luis Pastor, CEO of LCCU.


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