Credit Union Helping Members
When I walk into my credit union—- USE Credit Union—- I am always greeted by name, but these days I am also asked how my life is going.
The folks at my CU genuinely care and don’t judge me by my dwindling savings account because they get it. The economy is in the tank and their members are hurting, but they know what they stand for.
In 1935, when credit unions were helping Americans through the Great Depression, the treasurer of a Midwestern Credit Union said that credit unions were “not for profit, not for charity, but for service,” and that philosophy holds true today.
A budget impasse in late June prompted California Gov. Arnold Schwarzenegger to threaten to cut state workers’ pay to the federal minimum of $6.55 per hour – not nearly enough to get by in the hi-rent Golden State. Around that time, though, a notice appeared on the door of my credit union, which serves state workers as a primary SEG. The notice offered help in the form of low-interest loans in case Schwarzenegger came through with his threat. He didn’t, but how many state workers with accounts at banks had that peace of mind?
Up in Sacramento, The Golden 1 Credit Union the nation’s sixth-largest credit union with nearly $7 billion in assets, has offered short-term, no-interest loans to state workers for years, as long as the state legislature has argued over budgets. A California governor has only made good on his wage dropping threat once, which is a good thing, because the state employees nearly half a million people.
However, the legislature rarely agrees on a budget by the state’s June 30 deadline, which automatically stops paychecks for the 1,500 legislative employees. This not only includes the legislators themselves, but their congressional staff, and even the capitol building workers, like janitors and security guards. This year, The Golden 1 extended no-interest loans to 1,100 of those employees, resulting in a net loss of $52,000.
Wow, losing money to help people in trouble. What a concept. My credit union and The Golden 1 weren’t the only ones offering to help state workers; several credit unions throughout the state, and even a couple of banks had special deals.
Those programs sure made an impression on my friends who work for the state, offering them solace and reassurance that their credit union not only cared about them, but had a back-up plan in place.
Back-up plan… another interesting concept for a financial institution.
But that’s not the only way CU’s are tossing their members a life-raft.
Outreach programs aimed at people hurt by subprime mortgages have enabled nearly 500 homeowners across the state to refinance about $69 million in home loans.
The programs benefit homeowners who had struggled with the monthly payments on their adjustable rate loans. This came after critics said the federal government and big lenders had not done enough to help homeowners fight their way out of the mortgage mess.
Maybe Congress should call up some CU board members and ask them for some advice on the Wall Street debacle. It couldn’t hurt, and let’s be frank: credit unions are the only solid, liquid institutions these days.
Other credit unions are offering products specifically designed to combat payday loans, or cash advances, which burst onto the scene in the 1990s, even as the nation experienced record economic growth.
A typical payday lender provides immediate cash in return for a postdated check for the loan plus a fee, often with no background credit analysis. Sounds good to the average consumer— and especially good to desperate ones.
But you folks in credit unions know the bad news: that high-priced loan center, conveniently located in almost every strip-mall in America, often charges between $15 to $50 for every $90 borrowed. If you extend or “roll-over” the loan, you must pay the fees for each extension. This could force the Annual Percentage Rate (APR) up over 400%. Thirty bucks doesn’t sound like much to uneducated consumers, but when it’s taken from a $200 loan, that translates into an effective annual percentage rate of 390%.
Silver State Schools Credit Union in Las Vegas offers a payday lending alternative called CashNow Loan, which has a one-time annual fee (10% of the amount borrowed) and a $10 Annual Fee. The term can be extended up to 12 months.
Credit unions thrive when the economy is down. Many credit unions were chartered during the Great Depression or shortly thereafter; this new recession, depression, or whatever they’re calling it these days, presents an opportunity the industry probably won’t see for another 75 years (what a double-edged sword!). Credit unions don’t have the scramble to meet the needs of a credit- crunched America, because they’ve been doing it forever.
Keep doing what you’re doing, credit unions. Your good deeds, which is just business as usual in your world, are about to come back to you in the form of a major market share gain.