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Credit unions develop menu of responses to shutdown

Oct. 13, 2013 - 06:00AM   |  
By AL KARR   |   Comments
Pentagon Federal Credit Union
A customer enters the Pentagon Federal Credit Union at Andersen AFB, Guam. Credit union officials said federal employees having financial troubles should call to discuss solutions tailored to their needs. (U.S. Air Force)

Congressional sequestration cutbacks in spending, resulting furloughs and the governmentwide shutdown have been posing serious financial hardships for many of the 2.1 million civilian federal employees and additional contractors doing federal work.

But myriad credit unions that serve military and civilian personnel alike have been trying to respond with various offers, such as deferred loan payments, stopgap pay that substitutes for lost wages and other financial assistance.

Many credit unions also provide similar financial assistance to their military members and their families who face hardships. The assistance for civilian employees is often more crucial than that for military personnel, whose pay under the cutbacks has been protected by Congress.

Civilian employees have suffered three years of pay freezes. And often, such as with the recent overseas deployment of troops at Fort Hood in Texas, “spouses are left behind,” and some of them are civilian employees of the military, said Kevyn Myers, executive vice president of card services at Pentagon Federal Credit Union, or PenFed.

“We encourage members who are federal employees to call us and discuss their problem,” said Jeannette Mack, corporate communications manager for Navy Federal Credit Union, the largest credit union, “because the solution is going to be personal.”

NFCU’s 4.5 million members include all Department of Defense employee and contractor personnel, and the same for the Coast Guard. Members are counseled on the ins and outs of personal financing. “We highly stress financial literacy for our members,” Mack said.

NFCU offers special 3 percent interest rates on loan overdrafts, effective through June 30, 2014; a line of credit up to the amount of an existing loan; adjusted loan repayments; expedited approval of credit card line increases; personal low-interest loans or ones with no required collateral; and penalty-free early withdrawal of certificates of deposit.

Cornelia Dowyer is a project manager for a federal agency in Virginia that she asked not to be named, and her husband is a legal analyst for the Social Security Administration, also in Virginia. When the shutdown began, she called the HEW FCU, and was given two options; she took the one deferring $1,300 in one month’s combined payments on a credit card, signature loan and two lines of credit.

If the shutdown drags on long enough, Dowyer said she’ll have to also consider the other option — a new six-month low-interest loan. And she also got a $650 one-month deferment on a car loan from NFCU.

LaToya Davis, a single mother of four children, is an ethics specialist, training fellow employees at the Department of Education. The day the government shutdown began, on Oct. 1, she phoned the HEW FCU, crying, and was able to get payments totaling $1,019 on car and signature loans and a credit card deferred until December.

“That was a huge burden when you’re not sure where the money is coming from,” Davis said.

NFCU said on its Facebook Page in September that it would cover the Oct. 15 payroll for active-duty members who are signed up for direct deposit.

The State Department FCU, with 67,000 members, provides 60-day loan payment deferment tailored to the member’s loan type and status; a special SDFCU credit card with 0 percent interest for the first six months and no balance or annual fees; a free budgeting tool to help members trim their spending; and free financial coaching, said Carrie Shaffer, marketing manager.

The Energy FCU, under sequestration, allows some members to skip a month or more of payments on loans. And with furloughs caused by the shutdown, the Energy program also provides a special-rate (10.99 percent) loan that can be twice the members’ yearly take-home pay or, in especially dire situations, various loan modifications, said Marilyn Davis, vice president for lending and collections.

“We urge members to work out solutions to problems, rather than evade them,” added Valerie Murphy, Energy’s director of marketing and business development. Members numbered 12,814 at last count, including employees, family and contractors of the Energy Department, the Nuclear Regulatory Commission and about 180 other federal agencies and private companies, all within 25 miles of one of the credit union’s branches.

The willingness to help members reflects the fact that credit unions are strongly consumer-oriented, with members also being the owners, serving on and electing boards of directors, and even collecting dividends when their non-profit credit union has a money surplus.

The National Association of Federal Credit Unions recently set up two websites featuring 64 credit unions offering “furlough assistance” programs, and “shutdown assistance” offered by 51 credit unions. These are more rigorous than what banks may provide customers in times of financial stress, said Quincy Enoch, associate director of legislative affairs and military liaison for NAFCU. “They really step up to the plate,” he said.

Indeed, credit unions provide this kind of help to members generally when they’re struggling to make loan payments or when the flow of weekly or bi-weekly paychecks is interrupted by crushing events, or as they struggle with long-running pay freezes. The Pentagon Federal Credit Union, or PenFed, maintains such a bailout program year-round for events such as Hurricane Sandy, for example.

“PenFed’s number one priority is to be here for our members,” said Myers. Members are generally employees, family members or contractors at DoD and military branches, the Coast Guard, DHS, American Red Cross and many other groups.

Credit unions’ broad menu of financial services, in fact, are usually more generous than those offered by banks, without the profit motive for serving investors. Other advantages cited by the NAFCU:


Joining/switching is easy.

Find a credit union to join at www.culookup.com. You can apply at a branch or online. Many credit unions have online forms or “switch kits” that make switching a snap. It only takes a few minutes to open a new account and transfer funds. Once your account is established, you can also implement your automatic bill payment options.

Many credit union members switch to other unions that they find better suits their wants, or simply join more than one. There’s no real need to switch, officials say. Indeed, credit unions’ favorite saying is, “Once a credit union member, always a member.” NFCU tries to make changes “as seamless as possible,” said Mack. “I’m sure a lot of our members [are customers of] other financial institutions,” she added.


Low minimum balances and credit union fees.

Bankrate reported last year that the average minimum account balance required of bank customers was $723 and the average monthly fee was $5.48. At most credit unions, you can open an account for as little as $5 and the majority still offer no-fee checking.


Low interest rates on credit cards and loans.

Recent figures show that average rates for credit union classic credit cards are 11.68 percent, as compared with 13.28 percent at banks.


Convenience.

Many credit unions participate in a shared branching network giving members access to branch locations in all 50 states. They also offer access to tens of thousands of free shared ATMs nationwide, including at key 7-Eleven locations. The Energy Department FCU belongs to a network that shares 5,000 branches with other credit unions, and two ATM networks with 90,000 shared ATMS, for instance.

In other words, prospective credit union members should look for the same thing they expect from a bank — a full package of services that fit their needs, and then some. It boils down to “customer service, convenience and [good] prices,” said Energy’s Murphy.

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