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Breaking the Bank Can a credit union offer more financial flexibility for artists?

Written by Tara Mazurk While we often join traditional financial institutions due to convenience or popular reputation, sometimes we can overlook the high interest rates, inflexible loan offerings, and lack of overall sympathy for the creative sector. In some cases, arts professionals are met with skepticism when declaring their occupation and average income, which can make managing one’s finances both difficult and intimidating. Recognizing the challenges of banking due to an artist’s volatile income, self-employment, or multiple jobs, Creative Arts Savings & Credit Union was created to offer financial products which were sensitive to the needs of creative professionals. CARFAC Ontario met with Steve Mumford, the CEO of Creative Arts, to discuss the growth of flexible banking methods for artists. Credit unions are often formed to serve a specific segment of professionals and are based off a nonprofit cooperative model. That is, each member holds $25 in shares and has a vote on major decisions. While members are considered shareholders, credit unions act in the moral interest of its members, rather than focusing on paying out high dividends as in a capital model. With this focus, there is no doubt that a credit union for the arts could benefit its members through financial inclusion and support. Before Creative Arts Savings & Credit Union began, the Canadian actor Peter Keleghan was in Los Angeles and went to a California-based credit union for performers. He was able to get car loan, a credit card, and was treated with respect. When he came back to Canada, Keleghan had a problem dealing with traditional financial institutions to the extent that when he wanted to buy his first house, he had to get his father to co-sign. He approached ACTRA (Alliance of Canadian Cinema, Television, and Radio Artists) and addressed the lack of decent financial services for Canadian performers as compared to the availability in the United States. In 2007, ACTRA put their application through to the Canadian Ministry of Finance, obtained their license in 2008, and opened Creative Arts in January 2009. One of the first action items was to consider opening membership beyond performers as many artists face the same financial challenges when approaching traditional banks. Steve Mumford says that “we convinced the Board that there was a much bigger market to give us more viability and sustainability” and to expand relationships with the entire creative sector. Another commonality across professions is extensive travelling both locally and internationally. With this reality, we need a banking system that is readily available and cost-friendly. For Creative Arts, they wanted a model that offered a number of different access channels such as online banking, telephone banking, and the Interac system. As a part of the Exchange Network, it is free for Creative Arts members to access ATMs through the vast majority of credit unions, HSBC, Manulife, National Bank of Canada, and ING. In being part of the third largest network in North America, members can look for signs which indicate if the ATM is part of the Exchange Network, while accessing their account through non-participants will yield a fee. For international travel, Steve Mumford also notes that he has never encountered a problem with accessing a Creative Arts account outside of Canada. Along with banking availability, credit unions are able to tailor their loan programs specifically to the membership they serve. Some offerings include flexible repayment schedules and a higher level of patience when it comes to making payments. Steve recognizes that many “borrowers run into tight situations where they can’t make payments and often the typical [response from banks] is ‘90 days or out’. Credit unions tend to work more closely with members and are sensitive to what is in the best interest of artists.” To address the prevalent volatility of income, Creative Arts qualifies people based on the past three to five years. Traditional financial institutions often only look at one to three years, which has a tendency to highlight periods of slow income. Steve and his team use the strategy of expanding the time frame to balance out peaks in their members’ earnings.

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Creative Arts offers many borrowing products similar to many banks, such as mortgages and lines of credit. However, one distinct difference is the understanding of why you need the loan and the various purposes it may serve. Creative Arts’ Self-Promotion loan is a line of credit of $5,000 or more and was originally designed to help performers enhance their physical appearance as an investment for their career. Transferrable to visual and media artists, CARFAC and Creative Arts support expenses such as travelling, supplies, projects, professional development, and much more. As an unsecured loan, there is no stipulation what the purpose of the loan should be. Rather, the qualification is based on need. Currently, there is a realization taking place in the arts community that the ‘day of the grant’ is fading. Although the money is well spent, there are simply not enough resources to reach everyone. The sector is now looking at sponsorships, donors, and borrowing money. Steve says that “now artists and organizations are trying to sustain debt and that is what we are helping with. For example, if a theatre is looking at a capital project, there is a good chance that part of that money is coming from a loan. Creative Arts is assisting by educating our members about the loan application process along with managing the additional outflow of loan payments.” Creative Arts currently does not have a credit card, but they have previously explored options for payment cards which act like a credit card but are tied to the funds in members’ chequing/savings accounts. In searching for alternatives, Steve firmly states that “Creative Arts is not interested in providing our members with a credit card that is going to charge 25% or give them a tough time in qualifying. The national credit union system is looking at the possibility of providing a credit card on behalf of all Canadian credit unions. This would allow us to brand the card, qualify the credit, and set the rates. We are confident that we could provide a product with interest between 9-11%, which is usually half of what the typical card issuer is going to charge our demographic.” Although credit cards are not currently offered, the time Creative Arts is taking to research alternatives may provide a more reasonable option for artists. While exploring how one can effectively manage his/her own finances, it is important to seek the available resources so that bookkeeping is completed correctly. Steve mentions the worst case scenario where “we ask to see their tax return, but

they don’t have it because they haven’t filed their taxes. Creative Arts offers a way of counselling and pointing our members in the right direction to take charge of this responsibility. There are many reasonably priced accountants that work for creative artists so they understand the need of their situation. You will recover an accountant’s fee based on the expertise that you acquire, the dollar amount on your tax return, and the potential avoidance of getting audited.” Steve adds that Creative Arts archives members’ financial files for seven years and are available upon request without charging a fee. Using archiving as an example, many traditional financial institutions offer these services but require that members pay to use it. Creative Arts has a keen eye on these services and are working with organizations such as CARFAC and Artscape to adapt their offerings to be artistfriendly and financially accessible. Creative Arts Savings & Credit Union adopts a simple membership application process through an online form. If you receive income in-whole or inpart from the creative industry, you and your family members are eligible to apply. Whether you are confident in your financial habits, unsure of your current banking methods, or hoping to become more aware of financial planning, it is worthwhile to examine different services that support your needs. Steve says, “the biggest thing that we offer, aside from product, is that we understand the economic environment and the challenges of creative artists. We are able to deal with these issues with a much higher level of respect. We have heard horror stories of how artists are treated at regular financial institutions; they always feel bad telling the lender what their occupation is, as if they have to apologize for it. It is a terrible thing to approach someone for credit and feel belittled. The banks cater to the top 1% of the creative arts, but the other 99% are encouraged to move along.” Credit unions have a strong focus on relationship building which allows each member to support his/her peers through the cooperative model. The arts sector is now creating professional outlets which support business practices with a sensitivity to personal challenges. Long-awaited and welldeserved, Creative Arts Savings & Credit Union gives us confidence in an inclusive financial model that we can bank on. To contact Creative Arts Savings & Credit Union: www.creativeartscu.com | 416-642-6751 102-625 Church Street, Toronto, ON M4Y 2G1 §

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