LANSING, Mich.-A faltering automobile industry and seniors struggling to pay for essentials have prompted Auto Body Credit Union to introduce two new products to help members navigate a tight economy and the holidays.
ABCU here has launched a $2,000 maximum signature loan that defers the first payment for three months, and it is offering a free, two-month loan extension that replaces its annual holiday skip-a-pay program.
The free extension is expected to cost the credit union $100,000 in lost fee income, according to Marketing VP Jeff Croff, who said the seriousness of the economic downturn justified the decision to bump the annual skip-a-pay promo that typically carries a $25 charge. Both products were introduced after the $145-million ABCU learned about some tough issues facing its members.
"We heard a lot of stories, one in particular from a member who came in and talked to us about his situation," Croff said. "Due to the mortgage crisis and all of the wonderful things associated with that, his monthly mortgage is now garnisheed from his Social Security."
Croff said the member has a mortgage from Countrywide in which the APR adjusted to near 15%, and $1,800 is coming out of each Social Security payment, leaving the member with less than $600 a month for everything else. "He is retired and on a fixed income, and this really tough loan isn't leaving much for food and utilities," Croff said. "It's making it hard for him to keep the lights and heat on."
The stock market plunge has also strapped seniors. "Many of our retired members are counting on their investments to provide them with a certain amount of revenue," Croff said. "As their investments have been hit hard over the last few months, their standard of living has been significantly affected."
Add in automotive industry layoffs and work stoppages, and a large percentage of the credit union's membership has concerns right now, Croff noted. ABCU serves United Auto Workers Local 602, and numerous other select employee groups.
The free two-month loan deferral was recently announced to help members though the holidays. The loan is not good for first mortgages and home equity lines of credit. "We usually get about 15,000 members taking the annual skip-a-pay," said Croff. "This is a nice surprise for many of them."
Earlier, ABCU introduced its Lend a Hand loan-a $2,000 maximum, 36-month signature loan risk priced at 9% for the best paper-that's receiving a lot of attention.
ABCU is in a good position to forego the fee income and make the signature loan because its capital is strong, Croff pointed out. "Our capitalization is still above 11%...It's time for us to step up and use some of that money to help members when they need it."
Croff said ABCU plans to continue to seek ways to assist members during the tough economy, a mindset that harkens back to the CU's roots.
"We're going to be listening closely to learn what our members need," Croff said. "We were created years ago when our founder saw that during an autoworkers work stoppage his friends were losing their houses, furniture and cars, and they needed a credit union to help them. There wasn't a credit union serving UAW Local 602, so we were formed. We try to live up to those high standards set years ago."
