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More CUs Preparing Members For Sequestration Issues: A Special Report
MADISON, Wis. (3/6/13)--More credit unions are advising their members on how to mitigate the impact of sequestration on their financial well-being and offering special services to reduce the impact from the gap in income generated by government furloughs.

More than one million employees of the federal government, many of them members of credit unions, may receive furlough notices due to the budget cuts, which took effect Friday.

San Diego, Calif.-based Cabrillo CU said Friday it is rolling out a 0% annual percentage rate (APR) Sequestration Assistance Loan (SAL) for $2,500 to help supplement incomes of federal employees facing temporary furloughs or reduced hours as a result of the mandatory budget cuts.

"We've received numerous calls from members in the past week, worried about how the sequestration will affect them and their paychecks," said Robin Lentz, president/CEO of the $196 million asset credit union. "They've asked us if we could help, so we've developed this loan program in response to their needs," Lentz added.

According to Toby Hayes, Cabrillo's vice president of marketing, the credit union has members in "dozens of federal agencies. All of them have different payroll days and each federal agency is handling the temporary budget cuts differently, based on their operational needs. So our biggest challenge was developing a single way to help as many federal employees as possible, to provide some relief caused by the temporary reduction in their payroll."

The National Foundation for Credit Counseling (NFCC) is offering consumers advice--which credit unions can pass along to members--about maintaining financial stability during sequestration.  Consumers should assess their current financial situation and evaluate four personal finance areas: budgeting and credit management, saving and investing, planning for retirement, and home equity. Credit unions have a variety of financial planning tools available from the Credit Union National Association. (Use the links.)

If the assessment finds problems, don't ignore them--especially in emergencies, NFCC said. "Take action sooner rather than later, as delaying only makes the problem harder to resolve," said NFCC.  Consumers can take control by reviewing their credit report and score, creating a cash-flow calendar listing all sources of income and dates bills are due, paying down debt and suspending uses of charge cards; and getting financial counseling.

Other credit unions announcing plans to assist members through the furloughs have similar plans:

  • Metro Atlanta-based Associated CU will offer 0% interest loans and certificates of deposits withdrawals with no penalty fees. Its Federal Employee Relief Loan is for the difference between the member's last direct-deposited paycheck and the sequester paychecks. The loan provides an interest-free money stream during the cuts. "Since 1930, our core membership base has been federal employees," said Associated CU President/CEO Lin Hodges. "We intend to stand shoulder to shoulder with our members if and when we are needed."
  • Excel FCU, Norcross, Ga., has short-term 0% interest loans, loan payment extensions, increased credit card limits, waiving of service fees and late fees, and modification of interest rates on consumer loans and mortgages. "We will evaluate each member's personal situation and their history with the credit union to determine which program or programs would help the most," said Bonnie Trappe, Excel FCU executive vice president.  "We realize these are uncertain times for some of our members. The credit union philosophy is all about helping people, and we're always seeking ways to serve our members.  In uncertain times, we want people to know they can count on us to be on their side."
  • Palmetto Trust FCU, Columbia, S.C., has a process similar to 1995 when Congress shut down the federal government, said CEO Lucile Beckwith. It offers a 30-day, 0% interest loan equal to the members' net pay if they direct deposit their paychecks, with a 30-day renewal available. "We are refinancing vehicle and personal loans to lower payments for our federal employee members who expect to be furloughed," she said, noting  that "they really need the lower payments to help them through the furlough period; and, as we tell them, with our simple interest loans, they can always pay more than the payment amount with no penalties."
  • JetStream FCU, Miami Lakes, Fla., whose core membership includes Federal Aviation Administration and other department branches, is offering a 60-day, 0% interest, no payment Furlough Relief Loan up to $2,000. Members can repay the balance at the end of 60 days or convert the loan to a 12-month signature loan with an 8.99% interest rate. "Assisting our members during this challenging period by providing them with financial options is our top priority," said CEO/President Jeanne Kucey.
  • NSWC FCU, Dahlgren, Va., offers penalty-free withdrawals from share certificates; reduced consumer loan payments for six months that require payment of interest only, which extends the term of the loan six months; skip a monthly payment for one month; and loans, workouts or restructuring of loans.
Another News Now story on sequestration,  "CUs To Furloughees: 'Be Assured, We've Got Your Back,'" was a featured link in a Washington Post story. See related story, "Wash. Post Spotlights News Now On Furloughs." This is a second article in that series.

Furloughs aren't the only time credit unions rally for members. Credit Union Magazine's story, "CUs Lend Members a Hand," addresses how "the worst of economic times tends to bring out the best in credit unions. The not-for-profit, cooperative business model was born in times of economic hardship. It still shines bright during dark days." To access the article use the link.

If you are doing anything special to help your members through the furloughs, e-mail your information to Uniteforgood@cuna.com, newsnow@cuna.coop, and asmarterchoice.org.
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