VIENNA, Va.-One month into the federal government's budget "sequester" and the nation's largest credit union are saying they are still not seeing much demand from members seeking financial assistance.
The so-called sequester is a set of automatic federal budget cuts that have gone into effect and that are to lead to job reductions and reduced pay to numerous federal employees. Even before the cuts went into effect, many CUs announced plans to help members.
Navy FCU, for instance, is offering low-interest rate loans, penalty-free withdrawals from CDs, skip-a-payment options on loans and more, but relatively few members have signed up for those offerings. Navy Federal said that may be in part because many federal employees affected by the spending cuts have not yet had to begin taking furlough days. With those unpaid days set to begin sometime in April, however, interest could pick up.
Across the country, Shelton, Wash.-based Peninsula CU is having a similar experience. The $150-million, 17,000-member credit union is offering members penalty-free withdrawals on certificates, debt consolidation programs, waived fees on loan refinances and skip-a-payment options on loans, but CEO Jim Morrell says that so far it has heard from few members looking for assistance.
Morrell told Credit Union Journal that Peninsula CU has been discussing the possibility of sequestration with its membership for several months, and many have inquired about how the credit union could help, but that has not in turn led to action being taken. Those that have, he said, may be members who have dealt with debt issues before, "so they're putting things in place. But the majority ... are not yet putting things in place."
Dipping Into Savings
Also troubling, said Morrell, is that many members are dipping heavily into savings to make up the difference in household incomes, rather than utilizing some of the CU's solutions. The challenge the credit union is encountering, said Morrell, is "I don't know that we're in a real good position to advise them, other than when they want to have conversations and ask or our advice," during which PCU reps can explain the benefits of a debt consolidation loan rather than using money that had been earmarked for retirement or a child's education.
At Hanscom FCU, Hanscom AFB, Mass., the response has also been tepid so far, and SVP of Lending Tom Becker said that while many members have taken a "wait and see" approach, HFCU has no plans to alter its marketing or messaging around the offerings. The $1-billion CU is offering low-rate loans of up to $5,000 for affected members, as well as CD withdrawals with waived penalty fees.
Complicating matters, said Becker, is that some government agencies have signaled they may get creative with where they make cuts, which may mean fewer federal employees are impacted. For members who inquire about sequestration assistance, the CU is pulling credit reports and seeing where it can save members money, including by stealing loans from other FIs. While Hanscom FCU has seen a small increase in loans, Becker noted, "I think that's just because the economy is improving and people are feeling a bit more comfortable-at least those people that aren't working for the federal government."
