Building a franchise starts with a good credit base
in order to establish yourself as a franchisee, you must be able to provide evidence of a successful credit history.
for some hispanics, this can be problematic.

By Rob Bond & C. Everett Wallace

Given the extraordinary growth of the Hispanic population—increasing at about three times the overall U.S. growth rate—there couldn’t be a better time for more members of the Hispanic population to make their debut in the franchising industry. However, in order to successfully establish oneself as either a franchisee or a franchisor, one must be able to provide evidence of a successful credit history. Unfortunately, due to ongoing discrimination, socio-economic struggles and cultural differences, Hispanics have had considerable difficulty making this particular financial break.
Hispanic families held lower credit card balances than those of non-Hispanic white families throughout the 1990s and early 2000s, but the growth of their credit card balances has far outpaced those of white families. While people of color have lower levels of card holding, statistics show they are much more likely to be in credit card debt and experience debt hardship.
Longstanding racial inequalities in wealth and income opportunity have made it difficult for Hispanics to build that extra safety net of home equity or liquid savings that would be needed to weather unexpected expenses or a reduction of income. Thus, in order to “make ends meet,” many Hispanic families have turned to their credit cards, accumulating monstrous bills that, when push comes to shove, they are unable to pay.
Compounding the problem are the numerous predatory lenders and affinity frauds that target the inexperienced Hispanic population. Hispanics are more likely to receive a disproportionate amount of subprime loans than their white counterparts, and are therefore more likely to fall quickly into debt.
Payday lenders also target Hispanics, insidiously pretending to assist them during times of economic crises while eventually ensnaring them in a vicious debt cycle. Affinity fraud representatives have been using and abusing the fact that Hispanics—specifically recent immigrants—are unfamiliar with the credit card system. Scammers use popular Spanish-language television and radio media to convince Hispanics that their cards are more reliable and easier to use than mainstream, legitimate credit cards.
Discriminatory lending practices and credit card scams are only part of the problem, however. The deregulated credit card industry itself, combined with the lack of financial education available for non-English-speaking Hispanics, is largely to blame for Hispanics’ difficulty in establishing solid credit histories. The dearth of financial literacy among Hispanics allows them to be easily roped into debt via universal default and fast-talking credit card representatives.
When Hispanic immigrants arrive in the United States, the first thing they do is try to establish credit by purchasing any readily available credit card and using it—without having undergone the proper education needed to be responsible credit card users. Financial literacy among Hispanics would allow them to choose reliable credit cards, use them with care and have the confidence to complain if or when credit card companies hike up fees unfairly.
In order to pave the road for brighter credit scores, Hispanic consumers need targeted education and financial counseling to build a deeper understanding of credit card policies and practices. The first step is for banking and credit institutions to offer more Spanish-speaking education programs that teach Hispanics about credit cards and basic budgeting techniques. Banks need to make it abundantly clear that credit cards aren’t supplements for income; they are conveniences, and need to be paid off within 30 to 60 days. Stricter regulations should be imposed on credit card companies and lenders alike, specifically regarding interest rates, junk fees and minimum payments.
There are many Community Development Financial Institutions (CDFIs) and Community Development Corporations (CDCs) already in place that provide needed financial services to Hispanics. Such institutions include ACCION New York, The Latino Community Credit Union (LCCU), The Urban Homesteading Assistance Board (UHAB), The New Mexico Community Development Loan Fund (NMCDLF), The Rural Development and Finance Corporation (RDFC), and the Peoples’ Self-Help Housing Corporation (PSHHC). This list is likely to grow exponentially in coming years as Americans realize the increasing influence of the United States’
Hispanic population.

Rob Bond and Everett Wallace are co-founders of the National Minority Franchising Initiative (www.minorityfranchising.com), an effort to increase the number of minorities in franchising.