WARMINSTER, Penn.-To head off potential problems with its credit card portfolio and respond to banks reducing members' lines of credit, Freedom Credit Union is aggressively promoting its debt consolidation loan.
The $350-million credit union just launched a direct mail campaign that targets 12,000 members it feels could be at risk in an effort to prevent economic "collateral damage" to FCU. While its credit card portfolio has shown no signs of trouble and delinquencies remain level, VP of Financial Services Anthony Silvi said Freedom believes the time to move is now.
"One thing that triggered the promotion is that we received calls from members who said their lines of credit with banks were being reduced, which made us realize that members will need to look elsewhere for credit," said Silvi, adding that credit cards and home equities are the areas local banks have been cutting back.
Not only does Freedom Credit Union feel members can benefit from debt consolidation and possibly the credit union's Visa card, it's urging members to make lasting changes to their financial condition, he said.
"We have been somewhat reluctant in the past to promote our debt consolidation product, because money was flowing so freely," Silvi shared. "After I consolidate everything for you I can't stop the credit solicitations you get in the mail. Members just seemed to get themselves back into more trouble."
Silvi contends that members' mindset is different today, especially as they learn of others' financial problems through the media. "I think members today will resist accepting new offers after they consolidate."
Silvi emphasized that the promotion's goal is first to assist members, but it is projecting a gain $2 million in loans through the offer. Freedom's fixed-rate, debt consolidation product is risk-based and charges from 8.49%-15.49% for terms to 72 months. The loan amount is also based on credit score, ranging from $500-$20,000. The CU's Visa card is risk-priced from 8.9%-15.9%.
"If the consolidation loan isn't right for some members, our Visa is likely better than anything they have in their wallet," Silvi said.
Member service reps have been trained to steer members to the consolidation loan. If members targeted in the mailing stop by a branch or call in, when their account information is accessed employees are alerted to ask about debt consolidation.
"We also think that if we can get members to fill out the application for the loan we can get them thinking about all of the high-rate cards they have," said Silvi. "We ask them right on the application to list their credit cards and their rates. Too many times members just keep those cards, pay the bill, and never think about the interest rates they are paying. We think when they really look at the statements, and pay attention to rates, they'll make a decision that will benefit their future."
