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CUs help underbanked servicemembers avoid payday lenders
WASHINGTON (9/14/12)--The news that the unbanked and underbanked households have increased slightly since 2009 comes as no surprise to the nation's defense credit unions.  The people they serve--service members and their families--are often prey to predatory lenders. As a result, these credit unions have a myriad of programs to serve them.

The Defense Credit Union Council (DCUC) and its members have offered page-after-page of commentary to the Consumer Financial Protection Bureau (CFPB) outlining the extraordinary service and support they provide their members who are often preyed upon by check cashers and predatory lenders.

"Military credit unions have done and continue to do an absolutely superb and most effective job supporting the daily financial needs of our troops and their families," said DCUC President/CEO Roland "Arty" Arteaga, in a letter last year to the CFPB. "Not only do they provide traditional financial products and services to their military members, but they also offer special products and services tailored for today's military and the environment in which they live and work."

In addition to the traditional products and services, many offer exclusive products, such as higher interest savings, loan discounts, early paydays, guaranteed paydays, payday loan alternatives, special lines of credit, no-cost financial education and training, the Military Saves program, transition assistance, streamlined military websites, electronic banking, overseas bill pay, overseas currency sales, overseas and stateside shared branching, grants for down payments to first-time home buyers of modest means, mortgage loan modifications, guarantee utility deposits, or support of the Servicemembers Civil Relief Act.

A number of on-base credit unions "go the extra proverbial mile in the face of a government shutdown and without hesitation 'stand to' to advance the military payday" and provide no interest loans to troops, Arteaga's letter said.

One clear example of  "Serving Those Who Serve Our Country"--DCUC credit unions' motto--is Service CU, based in Portsmouth, N.H.  On Sept. 4 it rolled out its "Guaranteed Pay" product. It provides a fee-free, courtesy pay-like funds availability of $1,000 that may be drawn by service members if their total Defense Finance Accounting Service net pay is not received into their account. This is beyond what Service CU committed to last year when the federal government was facing a shutdown. The $1,000 fee-free amount can be followed by another $1,000 line of courtesy pay on which fees are assessed. The loans must be repaid within 33 days of receipt.  If not, the servicemembers are discontinued from the program and they will go into a Repayment Plan.

To counter payday lenders' efforts, the $2.45 billion asset Service CU offers a Warrior Savings Account, with a 10% annual percentage yield (APY) for servicemembers deployed in active combat zones. The rate applies up to 120 days after the soldier's return from a combat zone.

Servicemembers who earn less than $2,507 per month are eligible for Service CU's "STAR" program, which gives an additional rate increase on the base savings rate, an additional loan discount  (for example, a vehicle and unsecured loan gets 1% off) and special certificate rates.  It also offers a special military relocation loan for those moving outside the U.S.

The $2.8 billion asset Tinker FCU, based in Oklahoma City near Tinker Air Force Base, also provides services customized to its servicemembers.  Its Starting Line Certificate provides higher dividend rates and requires a minimum deposit of $25.  Its Advantage Checking allows servicemembers to carry lower balances and offers dividends free services and benefits, and Reconnect Checking offers servicemembers a second chance to rebuild their financial stability, with no minimum balance requirements.

Tinker FCU also offers a short-term loan alternative to payday loans called Personal Access Loan (PAL). Once PAL is repaid, borrowers are eligible for a Credit Builder Loan Program in which servicemembers receive  interest rate savings for going through a financial education program which has one-on-one counseling with its partner, BALANCE.

The  $880 million  asset Scott CU in Collinsville, Ill., provides a payday loan alternative to servicemembers at Scott AFB . Its Easy Cash program allows members to borrow $300 to $1,000 until their next payday. The loan has no interest for 30 days, no fees, and no credit check, and it provides free credit counseling designed to help them escape problems the servicemembers may already be facing because of high-rate payday loans.

Scott CU also participates in the Operation Project and Provide program, a short-term, low interest-rate loan of up to $10,000  to help ease the financial sacrifice of reservists who are called to active duty.

Several defense credit unions have partnered up to offer a predatory-lending alternative loan program, Asset Recovery Kit (ARK). Formed by the PenFed Foundation at Alexandria, Va.-based Pentagon FCU, the program has expanded to other credit unions. These include Fort Bragg FCU, Fayetteville, N.C.; GeoVista FCU, Hinesville, Ga.; Fort Gordon and Community  (Ga.) FCU; SAC FCU, Bellevue, Neb.; Schofield (Hawaii) FCU; AmeriCU CU, Rome, N.Y.; Ent FCU, Colorado Springs, Colo.; SD Medical FCU, San Diego; Miramar FCU, San Diego; Pearl Harbor FCU, Waipahu, Hawaii; Redstone FCU, Huntsville, Ala.; Tyndall FCU, Panama City, Fla.; Belvoir FCU, Woodbridge, Va.; and Kirtland FCU, Albuquerque, N.M..

The ARK program has helped nearly 4,000 military families with more than $2.2 million in emergency loans and financial counseling. It offers short-term, interest-free advances to active duty, reserve and national guard military personnel with emergency cash needs. Borrowers pay a fee of  $1 per $100 borrowed for immediate cash advances up to $500 (or 80% of net pay). The foundation guarantees and reimburses all losses to participating credit unions. A service member can receive five advances in a single year, but is required to complete financial counseling before each subsequent cash advance. The program is offered free to all credit unions serving the armed forces and is branded with the name and logo of the partner credit union.

These are just a few credit unions' programs, but a quick review of nine other defense-related credit unions indicates that these programs are typical of the services they provide a significant portion of servicemembers and their families.
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