Cash On Hand: For members who will need to tap their own money immediately, credit unions need to plan now for how they will ensure access to cash across a variety of channels.
Funds For Now: Some people might find themselves in unfamiliar financial territory needing cash now. A suite of products and services that meet a variety of needs will showcase the credit union difference while helping people recover economically.
Funds For Later: Far-sighted assistance — such as refi programs — that won’t totally derail the future plans of borrowers could go a long way in making them whole without breaking the bank.
More than 3 million Americans filed for unemployment in the week after much of the country implemented measures to restrict movement and slow the spread of the coronavirus. As businesses across the United States shuttered and millions of workers began a new life of telecommuting, the Organisation for Economic Co-operation and Development said global growth could sink to 1.5% in 2020, although CNBC reports that could be optimistic.
One thing is certain in this environment of tumultuous stock markets and #stayhome hashtags, the long-term effects of COVID-19 will be deep and widespread. As businesses strive to construct some semblance of a return to “normal,” it’s important to remember credit unions help members and their communities every day of the year — through downturns and upswings. And, some of their more innovative offers are especially relevant during today’s time of heightened need.
Cash On Hand
As credit unions work to serve their communities, they might find members looking for fast access to cash. Nusenda Credit Union ($2.5B, Albuquerque, NM) has a well-vetted methodology for dealing with funds availability, one that balances risk to the credit union and rewards the member with a consistent user experience.
The New Mexico credit union uses what it calls its Funds Availability Matrix, a set of conditions that determine how much and how soon it will make available funds from any deposit.
“The matrix was created to move us away from a one-size-fits-all approach, to improve the member experience, and to create operational efficiencies,” Tom Hagan, chief risk and administrative officer at Nusenda, told CreditUnions.com last year.
Now Is The Time To Lead With Purpose
Members are looking for their financial cooperatives to help them navigate these uncharted financial waters and credit union leaders need a purpose-driven lens to help make unprecedented decisions.
Leading with Purpose is a 100% virtual learning experience which brings together best in class content from Harvard Business School Online, Callahan’s 35+ years of industry perspective and knowledge with unparalleled collaboration with other credit union professionals – to deliver this timely and imperative knowledge.
Along with allowing funds availability beyond the minimums dictated by Regulation CC, the matrix provides a consistent experience across Nusenda’s growing list of delivery channels, which now includes mobile deposits, person-to-person transactions, and video teller machines along with traditional branch teller encounters.
Why this matters now: A record 3.3 million Americans filed for unemployment from March 15-21. And although Congress has passed a sizeable relief package that will put cash directly into the hands of those who need it, many might have exhausted their savings by the time that relief arrives. That means members will need to access their money immediately. Credit unions need to plan now for how they will ensure members can access the cash they need from the channel they choose.
Funds For Now
Products From Past Crises
In addition to providing everyday value and solutions, these credit unions stepped up to provide critical assistance during a regional crisis.
When Hurricane Harvey made landfall in Texas as a Category 4 storm in August 2017, inflicting $125 billion worth of damage, TDECU ($3.6B, Lake Jackson, TX) responded with:
No late fees for the first 60 days after the storm.
Emergency loans up to $5,000.
60,000 auto loan extensions.
10,000 mortgage forbearances.
Redwood Credit Union
The Tubbs Fire in California burned nearly 37,000 acres and incinerated more than 5,700 structures. Redwood Credit Union ($5.0B, Santa Rosa, CA) responded with:
A community fund to support relief efforts.
0% loan for people who needed to get back on their feet or buy day-to-day essentials.
Temporary childcare for employees, free on-site counseling, and the ability to pool PTO hours to share with fellow employees.
When the Valley Fire caused an estimated $700 million in damage, destroyed 1,300 homes as well as several hundred other structures, and killed four people on 2015, Redwood responded with:
0% loan up to $5,000 for up to 12 months.
1.90% auto loan for those who lost vehicles in the fires.
2.90% RV loan to assist displaced homeowners.
Credit card limit increases to assist with emergency purchases.
Loan payment relief and lines of credit.
Some credit unions members will need emergency funds now. Not tomorrow. Not when business hours resume.
It is part of the credit union mission to provide low-cost credit to borrowers of modest means, which makes financial cooperatives natural fits to serve current and prospective members who might find themselves in a bind.
Digital Federal Credit Union ($9.4B, Marlborough, MA) is one credit union that makes it easy to tap into extra cash. In June 2018, the credit union introduced its Quick Loan, a pre-approved short-term personal loan members apply for solely through online or mobile banking. The credit union automatically approves the loan — up to $1,000 — in minutes without a credit check.
“We want to serve the underserved, someone without a credit history or with poor credit,” Lindsey Thomasian, consumer lending manager at Digital, told CreditUnions.com in August 2019. “We might not otherwise approve these individuals for a personal loan, but they still need some cash to help them out in a tough situation.”
Why this matters now: See the section “Cash On Hand” above. Also, credit unions can be a beacon of light during a dark time just by doing what they do every other day of the year. Different people are going to need different solutions, and some people might find themselves in unfamiliar financial territory. A suite of products and services that meet a variety of needs will showcase the credit union difference while helping people recover economically.
Funds For Later
For borrowers nearing retirement that need to tap into their home equity for unexpected major cash needs, desirable mortgage options are limited. Long-term loans can extend into retirement years and cut into savings earmarked for food, medical expenses, and other necessities. Short-term loans can make budgeting difficult for the remaining working years.
Star One Credit Union ($9.1B, Sunnyvale, CA) understands that borrowers want to be free of loan obligations before they leave the workforce without breaking the bank to do so. So, in January of 2014, the credit union introduced a 10-year fixed-rate mortgage with no closing costs and an interest rate modeled after Fannie Mae.
The 10-year mortgage was meant to entice members close to retirement to bring their loans — including the remainder of a 30-year-mortgage — to the credit union.
Prepare your credit union's response to COVID-19 using the Ideas In Action: Pandemic Response page, a hub for all of our articles, webinars, and policies concerning the COVID-19 outbreak.
“We thought lowering the term and eliminating closing costs would allow us to get those balances from other financial institutions,” Victoria Tabler, real estate loan services manager at the credit union, told CreditUnions.com in 2015.
Why this matters now: Depending on how long a stall the U.S. economy suffers and how quickly it can get back up and running, some members will find themselves in a situation that relief funds or short-term emergency loans cannot adequately address. In this case, far-sighted assistance that won’t totally derail the future plans of borrowers could go a long way in making them whole without breaking the bank.
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