The People's ATM

In the suburbs it used to be said that commercial bank executives live by the rule of 3-6-3: pay depositors 3 percent, lend at 6 percent and tee off at 3 o'clock. On the Lower East Side the rules are different. Pablo DeFilippi is CEO of the Lower East Side People's Federal Credit Union and he has never played golf in his life: "It doesn't motivate me."

The Lower East Side People's Free Credit Union (LESPFCU, an inelegant acronym for an equally inelegant name) was founded in 1986 and it sits on the corner of 3rd St. and Ave. B. It is a nonprofit organization owned by its depositors, and its mission is to serve low- and moderate-income people whom the commercial banks ignore. DeFilippi calls this market the "unbanked." When the credit union first opened it was the only financial institution in an area of almost 100 blocks. "So many people are left out of the system," he says. "In my view, access to financial services is a basic human right."

DeFilippi is a charming and energetic man who speaks English with a thick Spanish accent. His collar is unbuttoned and his tie hangs loose around his neck. He does not present the typical image of a commercial banker. I asked him how he got into the business.

"I came from Chile in 1990. I used to be a social studies teacher there. Nothing to do with numbers. When I came to this country, I went to study at an English school and my original idea was to work as a Spanish teacher, but I got a little bit discouraged by the way teachers are treated by their students." DeFilippi discovered the credit union because his parents lived nearby. "So anyway I opened an account here, and at the time the credit union was offering training for people with no background in financial services. It was a free seminar given by the manager of a fellow credit union. She helped me a lot and was my mentor. That's how I became a numbers person."

DeFilippi went on to study accounting at NYU while working at a credit union that served municipal employees. He returned to the LESPFCU as a volunteer in 1993, and three years later he became the manager. Even DeFilippi seems somewhat surprised by the course of his career. "I think the social studies background really helps me out though. When you deal with financial services at this level a lot of what you do is education."

DeFilippi describes his role at LESPFCU as simply that of go-between for the credit union's depositors and its board members. Nonetheless, he is clearly proud of the credit union's growth. In 1993 the LESPFCU had just three employees and $2 million in assets. Today it has 15 employees and more than $7.5 million in assets. It has also increased the size of its ATM network. From one to six.

On April 22 the credit union celebrated the opening of its new ATM on Ave. C. Remarkably, three U.S. representatives were scheduled to speak at the event and the extent of the fanfare is a reflection of the credit union's achievement. The new ATM will have cost roughly $140,000 to install, and the money for it has been raised entirely through grants and donations.

Discussing the economics of ATMs, DeFilippi estimated that the credit union will spend roughly $3000 a month on maintenance and associated charges. "Banks usually have three or four ATMs installed at the same time, and usually only in places with high pedestrian traffic. That's why midtown has so many ATMs on the corner, because it's almost guaranteed that you'll have enough surcharge fee income to cover your expenses. ATMs are often viewed as profit centers. That's why no other bank would set up an ATM on Ave. C like we did. But our intention is not only to generate income but also to revitalize the street. It is a community service."

It may seem odd to think of an ATM as a community service, but DeFilippi says there is no other way to look at it. Despite its successes, the LESPFCU still depends on grants for roughly 20 percent of its operating expenses, and though the credit union strives for self-sufficiency, it's not easy to achieve. "Why aren't there commercial banks on the Lower East Side?" asks DeFilippi. "Because you cannot make much money in low income communities. Which is why we don't make enough money. It's that simple. Our employee-to-member ratio is roughly 1 to 250. A typical bank has roughly one employee for every 1000 customers. They minimize their customer interaction, but we cannot do that because we are dealing with people who need a lot of counseling. We're serving a large population that has never used financial services before, and we have to spend a lot of money on support."

I asked DeFilippi where the LESPFCU finds its donors. He said that much of the money comes from government institutions. The credit union also gets grants from other banks: "Because we do what they should be doing and they pay us to do that." He offers a novel critique of bank mergers. "With Chase and JPMorgan we used to have two donors. Now they've merged and we only have one."

The LESPFCU is open to anyone who lives, works or worships on the Lower East Side.