How Martin Eakes Became The Most Hated Man In America (By Payday Lenders)

The CEO of the Self-Help credit unions uses secondary capital to fight predatory lending and protect financially vulnerable consumers.



Self-Help Credit Union
Data as of 09.30.19

HQ: Durham, NC
MEMBERS: 77,478
12-MO LOAN GROWTH: 24.3%
ROA: 1.48%

It’s almost impossible to have a conversation about secondary capital in the credit union industry without mentioning the two Self-Help credit unions Self-Help Credit Union ($1.0B, Durham, NC) and Self-Help Federal Credit Union ($1.2B, Durham, NC).

Self-Help Credit Union was the first credit union to obtain secondary capital when the enabling legislation 12 CFR 701.34 went into effect in 1996 and made the option available to low-income credit unions (LICUs). For several years, the two North Carolina-based institutions held the majority of secondary capital that was in the credit union system. Even today, the duo holds $148 million of the $292 million of secondary capital in the market.

The genesis of Self-Help dates back to 1980, when Martin Eakes, a young lawyer from Durham, NC, began working to establish worker, food, housing, and farm cooperatives to help low-income North Carolinians buy homes and start businesses. Eakes took his endeavors a step further in 1984 when he worked with these cooperatives to create a new credit union that provided a full range of financial services.

Martin Eakes, CEO, Self-Help

We issued what was essentially non-voting preferred stock that was not insured by the NCUA and was at-risk in case the credit union failed or had losses, says Eakes, who is a graduate of Davidson College, Yale Law School, and Princeton’s Woodrow Wilson School of International and Public Affairs.

Ten years later, after Congress and President Clinton created the Community Development Financial Institutions (CDFI) Fund for community development banks, Eakes worked with the NCUA to establish a mechanism for local CDFI matching funds for credit unions.

Credit unions really didn’t have a tool to do this, Eakes says. There was an NCUA task forced created under Norm D’Amours, and through that process they took what were the Self-Help equity shares and morphed that into what became secondary capital.

Fighting Predatory Lenders

In 2002, Eakes declared war on predatory lending by founding the Center for Responsible Lending to fight payday and subprime mortgage lenders as well as credit unions that were converting into banks without distributing the net worth to the members. The center hired experts and attorneys to fight state-by-state to outlaw interest rates above 400%, which Eakes describes as a debt trap that hurts working people.


Self-Help FCU
Data as of 09.30.19

HQ: Durham, NC
MEMBERS: 77,005
ROA: 1.17%

As a result, Eakes says he is the most hated man in America by payday lenders.

I’ve got more enemies than you can shake a stick at, he says. But all of them are good enemies to have.

The Center for Responsible Lending issued a report in 2006 that predicted 40% of all subprime borrowers would eventually lose their homes to foreclosure. Eakes testified before Senate Banking and House Banking committees from 1999 to 2009 and urged reform, which eventually came in the form of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

We were ridiculed by the mortgage industry who said these guys were crying chicken little, Eakes says. If anything, we were underestimating the problem. It was no pleasure to have been proven right.

At the peak of the recession in 2008, Self-Help created a second entity, Self-Help Federal Credit Union, to focus on the West Coast. The new credit union opened for business on Sept. 1, 2008. Six days later, federal regulators seized Fannie Mae and Freddie Mac, and on Sept. 15, Lehman Brothers filed for bankruptcy.

Our goal was to help preserve the community development credit unions in California, and we knew they were going to be wiped out or severely harmed by the foreclosure crisis in low-income communities.

Martin Eakes, CEO, Self-Help Credit Union, Self-Help FCU

That seems like a particularly terrible time to start a new credit union, but it really wasn’t, Eakes says. Our goal was to help preserve the community development credit unions in California, and we knew they were going to be wiped out or severely harmed by the foreclosure crisis in low-income communities.

Growth In The Aftermath

At that time, most of the subprime mortgage lenders were based in California, and credit unions with a net worth of less than 7% had $20 billion in assets. Self-Help FCU’s first order of business was to acquire 10 undercapitalized credit unions in California that were facing liquidation.

Self-Help Federal Credit Union grew to more than $1 billion in eight years, Eakes says. That had never happened before, but because we had this investment in secondary capital, we could do that in a safe and sound way.

The work didn’t end there. A former Self-Help board member, Bill Bynum, founded Hope Federal Credit Union ($302.7M, Jackson, MS) in 1995. That credit union now holds $26.6 million in secondary capital, coming in third behind the Self-Help credit unions.

Interest in secondary capital is growing, and new strategies, larger loans, and precedent-setting decisions by the NCUA could dramatically change the way credit unions deploy it. Learn more in What Is The State Of Secondary Capital At U.S. Credit Unions?

In 2012, with a $15 million secondary capital investment from charitable groups, Self-Help acquired the former Second Federal Savings and Loan in Chicago, predominantly Latino depositors and borrowers. In 2017, using another $15 million in secondary capital, it acquired Seaway Bank and Trust, a minority-owned community bank closed by the FDIC.

Although Eakes says he often finds himself at odds with the banking community, he maintains a positive relationship with many of them. In fact, he’s the longest-standing member for the FDIC Advisory Committee on Economic Inclusion and the Bank of America National Community Advisory Council.

His work has been recognized by numerous organizations. Opportunity Finance Network presented him with the Ned Gramlich Lifetime Achievement Award for Responsible Lending, and the Credit Union National Association presented him with the Herb Wegner Memorial Award. The John D. and Catherine T. MacArthur Foundation named him a MacArthur Fellow.

There are a lot of smaller CDFI credit unions out there that are truly doing the Lord’s work, Eakes says. We think we are, too, we’re just a lot larger. Secondary capital is something that makes this possible. For credit unions serving the underserved, being able to expand before they have retained earnings is a good thing.


November 18, 2019

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