Long before Congress passed the Military Lending Act in 2006 to defend service members from predatory lenders, credit unions were there to start young recruits on the path to financial stability. Pacific Marine Credit Union ($691.6M, Oceanside, CA), for example, offers a suite of products and services for its predominantly military membership.
PMCU’s 13 branches include locations at the largest Marine base — the Marines Air Ground Combat Center at Twentynine Palms — and at Marine Corps Air Station Miramar, Camp Pendleton, and Marine Corps Recruit Depot San Diego. Membership is open to anyone in San Diego, Riverside, and San Bernardino counties, but approximately 50,000 of PMCU’s 76,000 members are active duty or recently separated from service; another 10% — 7,500 — are retired military.
CU QUICK FACTS
Pacific Marine Credit Union
HQ: Oceanside, CA
Data as of 09.30.14
12-MO SHARE GROWTH: 0.40%
12-MO LOAN GROWTH: 7.80%
PMCU offers an arsenal of loan products and financial education. Some are targeted specifically at helping young Marines avoid what the credit union’s chief of staff, Brad Smith, calls the “death roll” that can come with patronizing payday and title lenders. The products are often not profitable for PMCU, Smith says, but they serve their purpose for those who serve.
Cash, Credit, And Savings
As an alternative to traditional payday lending, PMCU offers the Ready Cash loan, a $500 line of credit for people with credit scores lower than 660. The standard rate is 24%; however, the credit union will drop it to 18% if the borrower opens a Military Savers Account that requires them to save at least $10 per paycheck. PMCU has made approximately 1,300 Ready Cash Loans with about $500,000 in outstanding balances.
PMCU also offers shared secure VISA cards and a share-builder loan, which are both designed to help servicemen and women rebuild their credit. And its primary checking account carries no courtesy pay fees unless members overdraw their account by more than $20.
“Many young members are not good at tracking their small debit card purchases,” Smith says.
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In addition to the offerings for general members, Pacific Marine also has products exclusive to active duty military, such as a program designed for young Marines with no credit history. The zero credit score options include a credit card with a limit up to $3,000 at 19% APR and a vehicle loan up to $25,000 at 8% to 9.5% depending on the down payment. The auto loan also carries a 35% maximum debt ratio.
“The most important thing to understand is the lifestyle these service members and their families live,” Smith says. “They begin young, are sometimes isolated from civilization for long periods of time, and often rely on their spouse or other family members to help them deal with their finances because of deployment. But they need opportunities to build their credit and wealth just as much as anyone.”
They need opportunities to build their credit and wealth just as much as anyone.
Basic Financial Training
Financial education begins when members start boot camp at Marine Corps Recruit Depot San Diego. The credit union sponsors a one-hour class that includes how to track debit card use and how to build and maintain good credit. PMCU then follows the graduates to the remote School of Infantry at Camp Pendleton about 60 miles north of San Diego.
“They only have weekends off while they’re there, so we built a mobile branch that travels up to SOI on Saturday and Sunday,” Smith says.
The mobile branch includes two financial service representative desks and a teller window, and credit union staff talks to the young Marines about whatever financial services they need.
Pacific Marine Credit Union sends out a staffed mobile branch on weekends to the School of Infantry at Camp Pendleton. Courtesy of Pacfic Marine Credit Union.
The credit union also offers a full curriculum of classes at Camp Pendleton’s Financial Education Center, which is located adjacent to the PMCU branch there. And a certified financial educator/counselor is available to meet with units for on-site sessions at any of the four Marine bases the credit union serves.
Service Over Profit
Delinquency rates for the zero credit score borrowers are on par with B or high C level loans, Smith says. However, the delinquency rates for loans to the credit impaired are quite high.
“We’re lucky to break even on them,” Smith says. “But we see it as our duty to give active duty military a second chance to get squared away.”
The hit hasn’t hurt Pacific Marine too hard, according to Search & Analyze data on CreditUnions.com. The credit union’s overall loan delinquency rate as of Sept. 30 was 0.34% compared to an average of 0.79% for all credit unions with $500 million to $1 billion in assets.
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“Our credit union was born on Camp Pendleton and has served Marines, sailors, and their families for more than 60 years,” Smith says. “They serve with honor, courage, and commitment. We simply try to serve them the same way.”
Smith notes that only about 25% of Marines re-enlist after their first four years, and the credit union only keeps about 10% of its military members after they leave.
“This is a short, four-year period where our credit union can have a positive impact that can last the rest of their lives,” he says.
For example, Smith recently met a staff sergeant at a Marine Corps Scholarship Foundation charity golf tournament who got his first car loan at Pacific Marine using the zero credit score program.
“This year he and his wife are preparing to buy their first house,” Smith says. “He was very appreciative that Pacific Marine had gone out on a limb back then to help him build his credit.”