Herald News

Ethnic Savings Clubs Just The Ticket

When banks or credit cards won't do

Herald News — Thursday, July 17, 200

By HEATHER APPEL,
STAFF WRITER

PATERSON — When Lamar McKenzie needs money for a security deposit and the rent for a new apartment, he won't have to run up credit card balances or borrow from relatives. He'll simply use $4,000 he's scheduled to receive in a couple of months.

The $4,000 is the payout from a sou-sou, an informal savings club that many people in North Jersey ethnic communities belong to. Sou-sou's (also written su-su or susu) are known by many different names and spellings.

McKenzie, 21, of Paterson, is Jamaican and knows the association as a "partner." Dominicans here refer to it as a sociedad ("society"), or a "san" on the Caribbean island. To many Filipinos, it's a paluwagan.

A sou-sou is a group of people who come together and make regular weekly, biweekly or monthly monetary contributions to a common fund, which is then disbursed as a lump sum to one member in each cycle.

For example, say 10 people join, and each puts in $100 a week. Each week for 10 weeks, one of those 10 people will receive the whole $1,000, until each person has had a turn.

Interest is not paid on the money – in the long run, each member should get exactly the amount they put in. The organizer may decide the order of the recipients' payout by randomly drawing names out of a hat, or based on specific requests from people who know they will need the money on a certain date.

"It's really good, because you get the money right away," said McKenzie, who joined a sou-sou through his aunt. "You tell the person running it when you want it, if you want to be first, in the middle, or last." McKenzie has been depositing $100 a week since December.

People are using sou-sou's to save up for their children's sweet 16's or weddings, to pay for home repairs, or even for a long-awaited plastic surgery. Elsa Mantilla, owner of Mantilla Services and Rossy Elsie, a multi-service agency and adjacent retail store on 21st Avenue in Paterson, regularly sees people come in with savings from a sociedad to place a down payment toward a wedding or special event package.

"It's the same way with people waiting for their income tax money," Mantilla said. "As soon as I have my refund, I'll put down a down payment."

Maritza Acosta,54, said she participates in informal savings clubs "all the time." On this occasion, the financial goal is to accumulate $3,000 to pay for her daughter's bridal shower leading up to her wedding next March.

In a sou-sou, nobody gains or loses more than they put in, if it runs correctly, organizers say. An organizer or treasurer is responsible for collecting the money each week or pay period.

Although some argue that it's essentially the same as putting money away from your paycheck each month, participants say their way is more financially effective, because they feel obligated to the other members of the group, so they force themselves to pay into it.

"The sociedad is easier because you have a responsibility to find that money every week," Acosta said.

It's also a way to get access to a quantity of money that would be impossible to save up on your own in a short amount of time. Years ago, when Acosta sold jewelry and worked in restaurants for a living and had more cash on hand, she joined a sociedad that paid out $10,000.

Mantilla said she remembers her grandmother in the Dominican Republic contributing faithfully to a sociedad. When Mantilla was a new entrepreneur in Paterson, she joined other business owners who were pitching in up to $500 a week, and then she would have cash on hand in case she needed to buy something for the house or take a trip. Mantilla said she also has known people to use the savings for plastic surgery.

Now she now prefers to save her money in the bank, but she said a sociedad is a valuable option for people who need cash fast but don't want to pay the high finance charges associated with credit cards.

And the sou-sou practice appeals not just to people who don't have credit or don't use banks. In fact, McKenzie works as a bank teller.

There are words of caution, of course, to those considering forming a sou-sou. "If anybody plays a sociedad, it has to be with somebody you really trust," Mantilla said.

Since it's not a raffle or a lottery – because nobody earns more than the others and it's limited to a closed group – a sou-sou or sociedad would not be regulated by the state Attorney General's Office, said spokesman Jeff Lamm. That means there's no rule prohibiting the practice, but there's also little protection in the event that somebody is taken advantage of.

Jay W. McCann, Passaic County chief assistant prosecutor, said he had not heard of any recent complaints about this type of savings club.

"As long as people get out what they put in," McCann said, "it would not be illegal."

Money saved in a sou-sou is taken into consideration - when evaluating credit histories - by some lending institutions, for people applying for a mortgage. Michael Thurston, who counsels first-time homebuyers for the nonprofit New Jersey Citizen Action, said he hasn't seen a client who's in a sou-sou for some time, but he knew of the concept.

"Some of the banks will honor it if you come up with enough documentation to show how the sou-sou operates," Thurston said.

Paterson First Ward Councilman Anthony Davis, whose family is from Trinidad, grew up hearing about sou-sou's from his parents and their friends. Davis said he has been active in his own sou-sous since 1996, and is currently in one with 11 friends that will yield $4,800 this year, divided into four payments.

It's a way to set aside money that you might otherwise waste, Davis said. "Instead of saying I'm going to waste this $50, you put it away and know you can get it down the road. That $50 pans out to be $1,200."

Davis was looking forward to receiving his share this week, which he plans to use first for tithes, then for family expenses and the youth programs he supports. Whatever's left, he'll reinvest.

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