Some for-profit companies want to appear to be as consumer-friendly as credit unions. Warn your members that they’re not.
I just had a long, heart-to-heart phone chat with one of my girlfriends. There were tears and consoling, and lots of “I love you” and “thank you for being my friend.” So, when she called back just a few minutes later, I thought it had to be about something serious. And it was.
“By the way,” she said. “I forgot to ask you. I just got this offer in the mail from Union Workers Credit Services. All I have to do is pay $47 and I get a $10,000 credit card with a 5% rate. Should I do it? I mean you work with credit unions ... ”
“I don’t know,” I said. “That doesn’t sound right. That sounds too good to be true. Let’s think. That doesn’t even sound like a credit union. I mean, even though it has ‘union’ in the name. And they don’t have to check your credit or anything?”
“That sounds too good to be true, girl. I wouldn’t do it. Let me check around on the Internet and check out their reviews.”
So I did, and what I found was not really what she described. Union Workers Credit Services is indeed a legitimate business, but many consumers are saying they aren’t doing business legitimately. Neither credit union nor bank, the company indeed extends $10,000 at 5% for a flat membership fee. Only, once you receive that credit, you can only use it to make purchases through their catalog, for buying things like cruises, digital cameras, and kitchen appliances.
It’s one of a growing number of companies – from payday lenders to credit consolidation services – that promote their products as financial opportunities, when in reality the products could get consumers into deeper financial trouble. As consumers are increasingly trying to get on solid financial footing, they may be tempted to use some of these services to help. Credit unions should educate members about the benefits and pitfalls of turning to a for-profit company for help getting out of financial trouble.
For example, with student loan debt growing nationwide, many borrowers may find it tempting to consolidate their loans to get one manageable monthly payment. Tell your members not to go along with any company not associated with a financial institution or the U.S. Department of Education. Point them toward the industry’s leading student loan consolidation firms, such as through www.debt-consolidation-reviews.org. Tell them to avoid any offer that pressures them to consolidate quickly as there should be no time limit for consolidation opportunities.
Predatory pay day lending is also on the rise, as nearly 12 million Americans are trapped in a cycle of 400% interest payday lending, according to consumer watchdog group, The Center for Responsible Lending. Instead of relieving short-term credit, pay day lenders often only extend the length of debt. Promote your own short-term loans that offer lower rates to members trying to get out of debt, or who need a temporary financial boost.
And, finally, warn them about institutions that offer products that sound too good to be true or that sort of sound like credit unions, but aren’t. Union Workers Credit Services guarantees membership satisfaction and the lowest prices on its merchandise. So, perhaps its $10,000 credit deal would be great if you wanted to go on one of their discounted cruises. But I think more people are like my friend: they’d like a little affordable credit to pay off their high-rate credit cards, pare other debt, or just pay a month’s worth of rent so they can have some financial breathing room. They might be surprised by the restriction to buy from their catalog-only policy, and buying a cruise would only make their financial situation worse.
I texted my friend back instantly about that promotion. “Don’t do that credit card! You can only buy things in their catalog! And 350 people have already complained to the Better Business Bureau!”
“Haha! I love you! Thank you for being my friend.”