Credit Counseling Gives Members A Second Chance

Charlotte Metro breaks the cycle of growing debt by addressing the root cause of it.

 
 

After years of outsourcing debt management to a third party, Charlotte Metro Federal Credit Union ($307.4M, Charlotte, NC) brought its credit counseling courses in-house. It launched a new program in 2011 that is geared toward determining the root cause of debt and breaking the cycle.

Coming out of the recession, Charlotte Metro members had problems similar to people all over the country.

“People were struggling,” says Susan Coughlin, assistant vice president of member resource and retention. “We were looking for ways to help people on the bubble, people who had been doing well  but now were struggling to keep their accounts intact.”

CU QUICK FACTS

Charlotte Metro FCU
Data as of 09.30.14

HQ: Charlotte, NC
ASSETS: $307.4M
MEMBERS: 41,500
BRANCHES: 104
12-MO SHARE GROWTH: 0.5%
12-MO LOAN GROWTH: 7.9%
ROA: 1.29%

In her role overseeing member resource and retention, Coughlin studies the credit union’s at-risk accounts and is familiar with the inability of some members to control debt. Until 2011, Charlotte Metro recommended members to a debt management hotline.

In a 30 to 45 minute phone call, members worked with hotline representative to create a debt reduction plan. The representative noted the member’s income and debt information, contacted their creditors, bartered a debt settlement, and paid the creditors each month. The member would send their monthly debt payments to the management program.

Unfortunately, such efforts didn’t improve the member’s credit and didn’t address the habits that created the debt in the first place. So members continued to struggle. Loans went bad, some were charged-off, and members left the credit union.

“I wanted to stop the bleeding and see what I could do to control attrition,” Coughlin says.

Coughlin and a colleague earned credit counseling certifications, and Charlotte Metro began offering one-on-one credit counseling.

It’s a small percentage we’re counseling one-on-one, but it impacts their life in a huge way. 

Three Sessions To Financial Freedom

Charlotte Metro recommends members attend three credit counseling sessions, which it offers at the branch closest to the member. Sessions last from one-and-a-half to two hours, and counselors spend approximately 30 minutes preparing for each one. To date, the program has served approximately 100 Charlotte Federal members. And although the credit union doesn’t advertise the service, it generates plenty of interest through word-of-mouth and referrals from the credit union’s collections department as well as from Coughlin herself. One member even joined the credit union to participate in the program.

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Session 1

The first session typically takes two to three weeks to schedule and focuses on the member’s goals. Are they trying to eliminate debt? Are they trying to improve their credit? Are they trying to stop the collection calls?

“Everyone has a different goal,” Coughlin says. “We try to find out what that goal is and customize the program around it.”

The counselor and the member analyze the member’s cash flow todetermine what the member thinks they are spending. Together they call creditors to work out payment plans, and for the next two weeks, the member tracks everything they spend.

Session 2

One Member At A Time

When “Jennifer” enrolled in Charlotte Metro’s credit counseling program in 2011, she was losing sleep over her financial obligations. Her monthly payments were enough to keep creditors at bay, but she couldn’t climb out of debt.

Six months in the credit counseling program taught Jennifer how to control her finances. Now, the calls from creditors have stopped, and she’s paid off most of her debt. She bought a car and is refinancing her mortgage. According to assistant vice president of member resource and retention Susan Coughlin, Jennifer is the quintessential success story.

“We’re trying to improve the community, and we’re doing it one person at a time,” Coughlin says.

During the second session, the counselor and the member review the member’s spending log and compare the first session’s estimates to reality. With an accurate account of expenditures,  the member and the counselor can determine in which areas the member should adjust their spending.

“We do this together,” Coughlin says. “This is never us telling them what to do because they won’t adhere to it if it’s not theirs.”

The counselor helps the member build a budget, which the member must follow for approximately one month.

Session 3

The third session is all about figuring out how well the budget worked. The counselor and member discuss what worked and what didn’t.

“We make changes if necessary,” Coughlin says. “With some, we continue that process over a few months or even a few years.”

Regardless of whether the member continues with counseling sessions, the credit union tracks the member’s progress with soft pulls of their Beacon credit score every six months.

According to Coughlin, the majority have improved their score.

A Program For The People

Coughlin recommends credit unions start small with a counseling program because the sessions are time intensive. Charlotte Metro’s two credit counselors each spend between 20% and 25% of their week working with members. And although the program doesn’t have a significant effect on the bottom line, it has seriously improved the lives of some of its members.

“When you have a credit counseling program, you have to consider the individual benefits,” Coughlin says. “It’s a small percentage we’re counseling one-on-one, but for those people who go through it, it impacts their life in a huge way.”

The credit union has saved loans and originated others after repairing members’ credit, but the larger benefit is from creating a culture around Charlotte Metro. The members who go through the program are loyal to the credit union and stay.

“I can’t think of one credit counseling member who is not still with us, even with the ones that started three years ago,” Coughlin says. “You don’t have a lot of people that stay past that first year traditionally. These people are all with us and have loans with us.”

 

 

 

Nov. 10, 2014


Comments

 
 
 
  • I think it is wonderful the credit union proactively helps their members! It is important to note that a partnership with a non-profit 501c3 financial counseling agency should never barter debt settlement deals. Non-profit companies offer Debt Management Programs which improve member's credit by getting members back on track with good payment history which is about 35% of the score. My company, GreenPath Debt Solutions, offers a holistic counseling approach through our Financial Wellness Program, designed to address the root cause. Unfortunately, not all programs are alike when it comes to the counseling quality. We have even developed some creative programs for credit union partners to train their staffs for on site coaching and conducted a case study for how these work posted through CUNA strategic services. We applaud Charlotte Metro for caring for their members, our company was founded in the basement of the Michigan credit union league in 1961 and our roots and mission are entrenched with credit unions. We are thankful for credit unions like Charlotte Metro that don't stand on the sidelines but seek to give their members the tools to live a better life. I just wanted to clarify some of the pieces posted about offering a comprehensive credit counseling program.
    Andy Manthei