Credit unions pride themselves on being kinder, gentler alternatives to banks.

But that doesn't mean they are pushovers for deadbeats.

As loan chargeoffs tick upward in this latest surge of bad consumer credit quality, many credit unions are monitoring loan portfolios more closely, tightening credit standards, and cracking down on delinquent members.

"Once an account goes bad, we go after it," said Stan Hollen, chief executive of $1.8 billion-asset Golden 1 Credit Union, Sacramento, Calif. "Don't think that credit unions are different from other people in that regard."

Mr. Hollen said declining credit quality is indeed a problem at Golden 1, California's largest credit union. The institution's loss ratio for 1996 is projected to be 0.75%, up 14 basis points from 1995. That loss level is expected to hold up through 1997.

"It's up, mostly in the unsecured area," Mr. Hollen said. "It's not out of control, but it's alarming."

In response, the credit union has tightened credit standards twice in the past two years and is planning a third clampdown for this year. It also has stepped up collection efforts.

Statistics from the National Credit Union Administration demonstrate that the industry as a whole is facing credit problems similar to those at Golden 1.

Last June, the credit union industry's delinquency ratio was 0.9%, up from 0.8% in the year-earlier period, according to the regulator. And net chargeoffs were at 0.5%, up from 0.4% in June 1995.

Despite the rise, the chief economist for the industry's largest trade group sees no reason to sound the alarm.

Current delinquency levels are consistent with the industry's experience since 1993, said William F. Hampel of the Credit Union National Association, or CUNA. And chargeoffs remain relatively low.

"We hear more and more anecdotal evidence about declining credit quality in credit unions, but it is not yet evident on the financials," Mr. Hampel said. "Credit quality at credit unions is still extremely good."

When it comes to staying clear of credit quality problems, credit unions have a natural advantage. Because of their restricted membership bases, credit unions can't launch aggressive credit card marketing campaigns, which have often heightened bank issuers' risk.

"The banks have been extremely aggressive in marketing credit cards," Mr. Hampel said.

But down in the trenches, credit unions are concerned about the increase in delinquencies and, even worse, bankruptcies, which can blow up unexpectedly.

Bankruptcies have been increasing among members of the 12,230 credit unions, according to figures from CUNA. On average, a credit union in 1996 is expected to be hit with 17 bankruptcies, up from about 12 a year since 1993.

The country's largest credit union, Navy Federal Credit Union, has its hands full with bankruptcies, said chief executive Brian McDonnell.

In the year to date, the loss ratio on consumer loans at Navy Federal is 0.65%, up from 0.53% in the year-earlier period, Mr. McDonnell said. During this span, the loss ratio for credit cards shot up to 1.43%, from 1.05%.

Mr. McDonnell said 71% of the chargeoffs are attributable to bankruptcies.

The Merrifield, Va., institution twice in its history nearly capsized due to delinquencies, so it tries to monitor sour loans closely.

For example, the Navy Federal board maintains loss ratio standards within which the credit union must operate. The loss ratio for consumer loans can't exceed 0.74%, and the loss ratio for credit cards must be below 2.91%.

So far, Navy Federal has not tightened credit, Mr. McDonnell said. However, the credit union is checking credit bureau reports for virtually all its loan applications - a step it took for only half its loans a year ago.

That doesn't mean Navy Federal won't tighten if the situation gets worse, which Mr. McDonnell said is possible.

"I think chargeoffs are going to continue to rise, especially in the credit card area," Mr. McDonnell said. "I don't see anything slowing it down."

Delinquencies and chargeoffs at Pentagon Federal Credit Union, Alexandria, Va., are both still below 0.5%, but it too is requiring more loan documentation, said William W. Batchelor, senior vice president of credit and mortgage services.

"We haven't tightened," he said, "we're just being more careful."

Pentagon, Navy, and Golden 1, along with 29% of credit unions, make credit counseling available to troubled debtors. According to CUNA, credit unions offering those services have 54% of the 69 million credit union members.

Navy also will try to sit down with bankrupt members and their other creditors and work out repayment plans.

"If there is an honest attempt to get out of delinquency, we will meet with creditors" to come up with a new payment schedule, Mr. McDonnell said. "Unfortunately, not many bankrupt members avail themselves of that service."

Like Navy, Golden 1 tries to handle problems amicably. Referral to credit counselors is one example. Another is a quarterly magazine about money management that Golden 1 sends to members identified as shaky credit risks.

But if the diplomatic approach doesn't work, Golden 1 will employ other means. Hiring outside counsel to handle court battles against debtors has become so expensive that the credit union is looking to bring that expertise in-house.

"We plan to hire an attorney," said Mr. Hollen, the chief executive.

Perhaps the most clear-cut example of a credit union's taking a hard line against deadbeat members is Citizens Equity Federal Credit Union, Peoria, Ill.

The credit union broke with tradition last year when it refused to give striking workers at Caterpillar Inc. loan deferments through the end of the bitter 18-month job action. Although the credit union had been founded by these workers, they now represent roughly 10% of its membership.

The credit union is one of a growing number that will hold membership votes to expel members who have cost the credit union through bankruptcy.

Although only a few credit unions go that far, the industry is taking delinquents seriously. "Collectors are in great demand right now," said Mr. Hollen.

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