Credit unions are prepared to extend no-interest loans and other financial offers to members who may face financial hardships as a result of budget cuts in the next couple years, several executives say.
Staving off a national default, Congress officially landed on a resolution to the debt debate Tuesday, but decisions about where to make billions of dollars in cuts is up for discussion. Now, a special committee will look at ways to fulfill budget reduction promises, and credit unions are gauging how to assist members who may be impacted. Student lending, housing programs, and defense funding may all be among the areas targeted for funding reductions. A roughly $420 billion cut is already slated for the national security budget.
“The debate may have ended but the implementation has just begun,” says Chip Filson, president of Callahan & Associates. “This is obviously going to be a multi-year process … We can be part of the solution.”
To counter a financial blow to members who might affected by cutbacks, Northwest Federal Credit Union, Hanscom Federal Credit Union, TDECU, and SunCorp Corporate Federal Credit Union were among the credit unions prepared to offer short-term financial help.
Northwest Federal Credit Union ($2B, Herndon, VA) announced it would offer an advance to members in the amount of a direct deposit payment as a 30-day non-interest loan. The credit union proactively reassured its members that the credit union would “be there” for them during uncertain times. CEO Gerrianne “Winky” Burks says in an online announcement “Northwest Federal stands committed to fulfilling our mission of being a lifetime financial partner by making a positive difference in the lives of our members.”
Like Northwest Federal, both TDECU ($1.7B, Lake Jackson, TX) and Hanscom Federal Credit Union ($919.5M, Hanscom AFB, MA) said they were braced to provide similar short-term financial boosts to their members. TDECU offered the same interest-free loan to its members with only one criterion: that you be a member in good standing. “The main thing is trying to get the word out that we’re here for you,” Gary Lanier, vice president of TDECU, says. “Credit unions are definitely leading in this area. Now it’s being recognized that we’re here for our members.”
Scott Post, senior vice president of strategy and delivery at Hanscom, says the credit union benefited from preparing to help members threatened by furloughs earlier this year and during a financial crisis in 1995. “We stand prepared to offer what we’ve dubbed ‘Life Line,’ an interest-free line of credit in the amount of one-month’s salary, repaid 30 days after the advance is made,” Post says. The credit union, which caters to federal government and military personnel, also offers a skip-a-pay on non-mortgage loans on a case-by-case basis.
During the debt ceiling debate that threatened a government shutdown, many credit unions were equipped with plans to help their federally employed members through a tough financial time. For example, National Institutes of Health Federal Credit Union ($521.1M, Rockville, MD), was prepared to allow members to skip loan payments or offer low- or no-interest loans, according to a Baltimore Sun article.
"Our readiness level is high and we're ready to move as needed," NIH Federal CEO Julianne Callis told the Sun.
FAA Credit Union ($501M, Oklahoma City, OK) has a special page on its website that details how it helps members affected by furloughs. And the cooperative will likely see those offers, which include overdraft forgiveness and interest-free loans, in higher demand in the next several months as nearly 4,000 employees will likely be out of work through Labor Day, the New York Times reports.