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CUs credit card clunkers program finds success
NAPERVILLE, Ill. (1/12/11)--Leyden CU has adapted the “Cash for Clunkers” program to the credit card market, helping the Franklin Park, Ill.-based credit union serve its mission and offering members a way to get their debt under control. The program was initiated in August 2009, around the time of the federal government’s “Cash for Clunkers” auto program. Leyden CU CEO David Lukas decided to try something in similar to help members get out from under overwhelming debt they held on bank credit cards. Because it realized losses in the past with debt consolidation programs, the credit union entered the program with caution by first surveying members through its online banking site to gauge interest. The response was positive, and the credit union went forward with the program. To participate, members submit their worst, or “clunker,” bank credit card. In return, members who meet lending criteria are granted a three-year loan at 9% interest--the same interest rate as the credit union’s VISA Gold card. Once the loan is paid off in good standing, members can then re-apply for another loan to pay off other credit cards. Lukas said participation in the program has been modest, but those who take part are pleased with it. In fact, he described a few members who held $25,000 in credit card debt with interest rates up to 30%. “That’s something they were never going to be able to pay off,” he said. Lukas described the program as a success. In the year since it rolled out, the program has provided more than 40 loans, with low delinquencies and no charge-offs. Two members paid off their loans early and are starting on their second ones. At this point, the program is open-ended, Lukas said. “This is just one thing we can do to be true to our mission statement and help others along the way,” he explained.
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