MADISON, Wis. (3/4/13)--In a stellar example of credit unions putting members' interests above the bottom line, credit unions across the U.S. are rallying to assist members with furloughs that began at midnight Friday after the federal government's stalemate on wide-ranging budget cuts, called sequestration.
Among those who will be hit the hardest are civilians working for the government and military families. The Defense Credit Union Council says its member credit unions stand ready to help.
"All of our members have stepped up to the plate, as they've always done and always will," said Roland "Arty" Arteaga, president/CEO of the Defense Credit Union Council. "All of them are on edge" about what sequestration preposits, but many have already let members know they can get help through the furloughs from their credit union.
"Others are looking very closely so they can take measures [to assist] and so they can tell members, 'Be assured, we've got your back,'" he told News Now
Sequestration doesn't affect just credit unions with a presence on a military base. "Credit unions in general need to be sensitive to Army Reservists and National Guard citizens who aren't on a base but who still receive a furlough notice," said Arteaga. "We all need to be committed to our pledge of people helping people."
The furlough timing varies, beginning in April. Once the furlough begins, "civilian employees will lose one to two days out of each pay period while the furlough is in existence. To lose that much pay is huge, given the economic environment," Arteaga said.
Here are just a few examples of how credit unions will help their members:
- Belvoir FCU, Woodbridge, Va., created emergency loans up to $5,000 at fixed 4.99% annual percentage rate (APR), , with 0% APR the first 60 days and a maximum term of 12 months. Members can defer the first payment for 60 days. Members must direct deposit. They also can work with a loan officer on loan workout program, and--if they notify the credit union in advance--can skip a regular consumer loan payment. Members can also get free counseling on handling finances during the furlough.
- Fort Meade Community CU, Fort Meade, Md., is planning to offer refinancing to lower payments, advance due-date options and short-term loans to bridge gaps in income, plus add delinquencies to the back end of a loan.
- Fort Bragg, Fort Bragg, Calif., will extend existing loans up to six months with no payments, offer refinancing on both credit union and non-credit union financed vehicle loans and suspend those payments for six months, consolidate loans to reduce monthly payments, and waive early withdrawal fees on certificates.
- Fort Campbell FCU, Clarksville, Tenn., will offer a payroll/employment gap loan of up to $2,500 at a fixed 5.99% APR and 0% for the first 60 days with no payment for 60 days, at a 12- month term. It, too offers a loan workout program, deferred loan payment and free financial coaching through BALANCE, a financial education and counseling service.
- APG FCU, Aberdeen, Md., invited its members to call the credit union or visit a branch to discuss their situation. It offers loan assistance, expedited approvals, payment deferrals, free financial guidance and 24/7 educational resources.
- Andrews FCU, Suitland, Md., offers a Sequestration Bridge Loan up to $5,000 at 0% APR for 90 days, with flexible terms up to a year and payment options such as personal signature loans, secured loans and home equity loans. It also provides financial tools for money management.
- Hanscom FCU, Hanscomb AFB, Mass., whose Board Chairman Paul Marotta noted "we are true to our roots and the credit union motto, People Helping People," offers an interest-free Life Line Loan attached to the member's checking account to provide additional funds to cover checks, ATM withdrawals and debit card purchases. It also offers 0% APR line of credit for 30 days up to $5,000, and will wave penalties on premature withdrawals of certificates.
- Scott CU, Edwardsville, Ill., is providing furloughed members with direct deposited paychecks a Sequestration Loan of $5,000 at 0% APR, with no payments for 60 days and one year to repay it After the first 60 days, the loan rate will be 4.75%.
- AmeriCU CU, Rome, N.Y., is in a state that, according to U.S. Rep. Pete King (R-N.Y.), will be "disproportionately hurt" by cuts to programs such as Hurricane Sandy relief and 9/11 victims compensation. It offers a Department of Defense Helpline, information, tips for handling financial stress and tells members it is "waiting to work with you to help you and your family through this potentially stressful time."
- Randolph Brooks FCU, Live Oak, Texas, will provide assistance to federal civilian workers, some of whom might see 20% of their paychecks impacted. They can withdraw money from their certificates without penalties, or bridge the pay gap with low-rate loans. Payment isn't due until December so members can use the funds gradually as a "step down" resource. "By providing resources to assist members dealing with sequestration, we hope to make their lives and finances a little less stressful," Mark Sekula, chief lending officer at RBFCU, told the Texas Credit Union League (LoneStar Leaguer March 1). "While we can't affect government decisions on payments and furloughs, we can give our members tools to handle a sudden decrease in pay, and to make the next several months more manageable."
- Pearl Harbor FCU, Honolulu, Hawaii, has a legacy of supporting members over more than 75 years. It provided special assistance to members during World War II, as well as during and after the 2008 economic crisis by continuing free services and not increasing fees, and it offered free services during Japan's tsunami. "It's about helping people and it's more than business as usual--a core value that the credit union embraces," says its website. "Supporting our members in a time of financial crisis is important to us," said Eugene Y.T. Chang, president/CEO. "Providing assistance to our community is a vital part of our operation." It will offer special furlough relief assistance and options including payment deferments and partial payment plans on existing loans, flexible payment arrangements and term modifications, and low-rate consolidation loans.
Credit unions' philosophy on the furlough issue was summed up RBFCU's Sekkula: "Our goal is to serve our members, whatever the situation. While we hope these financial impacts can be averted, we will be ready to assist our hard-working members with resources so they can continue to meet their obligations and take care of their families."
The sequestration budget cuts refer to a package of automatic federal spending cuts totaling $1.2 trillion, which took effect Friday. News Now
will report on other kinds of credit unions assisting with furloughs soon. See related story, "How Is Your CU Aiding Members In Sequestration? Tell UniteForGood."