MERRIFIELD, Va. - Despite the fact credit unions largely didn’t get trapped in the mortgage morass that has dragged down so many other lenders, they are having to reach out to members who are now in financial trouble due to loans they have somewhere else.
Suddenly, credit counseling is a hot item, and where once it was only low-income members needing help, credit unions are finding the need is rapidly becoming more mainstream.
Navy FCU, for example, is reporting a 10% increase in members looking for credit counseling during the past three months.
“January was a long-time high for us,” Claudia Warszawski, manager of the personal finance management of Navy Federal CU here, said due to the current real estate market. Warszawski, who is also a member of teh CUNA Lending Council, said the goal of Navy FCU is not to keep members in its credit-counseling program.
“Our goal is they are in it for a couple of years,” she said. “We counsel them, and figure out what their problems are. Our biggest focus is education.”
Three Different Types Of Counseling
Navy FCU offers three different types of counseling: proactive counseling for those wanting to re-evaluate their situation and make sure they stay out of financial trouble, preventive counseling for those expecting to have a problem in the near future, and remedial counseling “for those that hit a brick wall and do not know which way to turn,” Warszawski said.
“I don’t think a program without education is a solution,” Warszawski stressed. “They need support. They need guidance. And they need education.”
Warszawski also warns members about risky places to go when seeking help. “I think members need to be very careful about what programs they get into,” she said, noting that some places that offer settlement services do not inform members that a settlement still gets written as a bad debt.
Warszawski said there are ways credit unions can recognize a member is having difficulties before the problems get out of hand.
“It’s difficult because it used to be only people of lower-income,” she said. “That’s not the case anymore. Now it’s across the board. As a credit union, we need to look at the members very closely. If a member is asking for more loans out of the ordinary that should send up a red flag that something is going on. I also think that all credit unions should be very involved in the education process.”
Navy FCU starts that education process early, by hosting budget classes for high school juniors and seniors.
“I think that all financial organizations have a responsibility to teach,” Warszawski said. “They can’t get it at home if their parents are not financially savvy.”
Allan Stevens, vice president and senior loan officer for the Franklin Mint Federal Credit Union in Broomall, Penn., said he is not seeing more members seeking credit counseling at present. But for the cases they do receive, they have set up a way to help.
“A couple of years ago, we partnered with a local non-profit credit-counseling organization – Consumer Credit Counseling Service of Delaware Valley – so that we can directly refer members there,” he said. “Members speak to certified counselors that assist with credit counseling, bankruptcy avoidance an construction of debt management plans, as needed.”
Franklin Mint FCU also assists members who have loans with the credit union and are in financial distress by considering refinancing, terms modifications and other approaches to make payments consistent and manageable for those with reduced income or increase debt burdens, said Stevens, who is a member of the CUNA Lending Council. He said that there is no question that these options help members. “We cannot help 100% of those we speak to, but clearly most members receive assistance from us,” he said.
Stevens said the best way credit unions can identify a problem before it grows, is through its staff members.
“Train, train, train,” he advised. “We continue to be challenged by having our member contact associates aware of what we and Consumer Credit Counseling Service of Delaware Valley can do for our members.”
Bill Vogeney, SVP, chief lending officer for Ent Federal Credit Union, said that are finding more members to be seeking help, but only because they are specifically trying to reach out to them.
“We realized we needed to something different after late last year, a retired military officer with a 740-plus score dropped off the keys, remotes … for his house,” Vogeney said. “Apparently, he had tried to sell the home for some time, and since he already owned another home in a different part of the country, he decided to just give us his home back.”
After that, the CU decided to seek out those that may need help. “We’re trying to communicate to our membership that we’re here to help.” Vogeney said.
Member Solutions Department
One way the CU has done this is by changing the name of its collection department to the “Member Solutions” department. They are also trying to contact those they think may need help.
“We’ll try to talk them through their situation,” Vogeney said. “What are their problems?”
In some cases, the CU refers their members to BALANCE, a financial education and counseling service in San Francisco.
“For some members, they need temporary relief,” Vogeney said, “which could include the ability to defer 30 to 60 days worth of payments. For some borrowers, we’ve agreed to temporarily reduce their interest rate and payments–in many cases reducing to interest only–for a period of up to 12 months.”
“In general, most people just need to help in budgeting and prioritizing the use of their funds,” Vogeney said. “We’ve seen borrowers who are complaining they can’t make their payments, but in reviewing their account history, we find they’re spending tremendous amounts of money on cell phone service, high speed Internet, cable TV, and on restaurants. Helping people understand what their real priorities are is critical.”
BALANCE has had an increase in credit unions members seeking credit counseling is apparent. “Our phones are ringing a lot more,” said Jeannine Moore, vice president of marketing at BALANCE. “In the past people would call to fix a situation so they could buy a home or new car. Now the calls are from people wanting to keep their house. We’re speaking to more people who have fewer options.”
What can be done to help these members depends on the situation, Moore said.
“It’s an individual thing,” she said. “We may be able to negotiate with a creditor or lender. In every case we weigh the pros and cons of all of their options.”
On the plus side, Moore said, people are eager to fix their situations. “We’re really seeing people open to making changes,” she said. Now more than ever it’s important for people to know there is a place to turn.”
For More Information
www.navyfcu.org
www.fmfcu.org
www.ent.com
www.balancepro.net
www.cunalendingcouncil.org
