Avoiding a Financial Freefall

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Credit union executives who think their members are under a lot of stress need to speak with David Elliott.

Elliott is the CEO of Fort Bragg Federal Credit Union (FBFCU) in Fayetteville, N.C. and sees the daily effects on his members and their finances. Fort Bragg is home to the thousands of paratroopers of the U.S. Army's famous 82nd Airborne with service from World War II to the fighting in Afghanistan and Iraq. Elliott's 55,000 members are active duty soldiers, veterans of the 82nd Airborne and their families.

With two wars going on and American troops scattered around the globe, it's easy for a young trooper to get in over his head financially. Three months ago, the Tarheel State shut down all payday lenders in the state and CUs have sought ways to take their place. FBFCU recently teamed with the Pentagon Federal Credit Union Foundation to offer quick, virtually no cost, no-interest loans for soldiers who've hit a snag with money.

"Something pops up and they need help. This is a great way to assist," Elliott said.

FBFCU was contacted by the Pentagon FCU Foundation to use its Asset Recovery Kit (ARK) that offers small, quick loans combined with certified financial counseling. Aimed primarily at young enlisted servicemen and women, the ARK loans provide up to $500 or 80% of the net take home pay or whichever is smaller. The loans are designed to help troops make it to the end of the month or to cover a sudden cost such as car repair. There is no interest charged, only a $6 fee.

"You pay $6 and that's it. No interest, no nothing. I don't know of anything cheaper than that," Elliot said.

Pentagon FCU Foundation President Roderick "Rocky" Mitchell said while payday lenders have been closed in North Carolina, Fort Bragg still has plenty of car title loan shops and rent-to-own operations that keep soldiers in a never-ending cycle of debt. That makes Fort Bragg FCU's membership the perfect fit for the ARK, he said. Mitchell said the Pentagon FCU Foundation has teamed with certified credit counseling agencies at Fort Hood near Waco, Texas and Fort Bragg in a concentrated effort to break the payday lending cycle nationwide. While soldiers can get more loans, the real goal of ARK is not just a quick source of cash for soldiers who can't or refuse to manage their money, but to get them help, Mitchell said. Mitchell said counseling is not a matter of choice.

"When they get to the point when they're going through the yellow pages, they're in over their heads. You will not get a second loan without counseling. We think that's the real value, not the money," Mitchell said.

Mitchell said PFCU Foundation will seek private funding this year to take the ARK project nationwide. Mitchell also stressed that Pentagon FCU isn't looking to build a branch on any military base, citing the Department of Defense's policy of "one CU per base" policy. Both Mitchell and Elliott agreed the main goal is to offer soldiers a quick solution and then steer them onto the right track for financial wellbeing.

"We're not trying to take each other's members, we're just trying to keep them away from payday lenders," Elliott said.

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