MADISON, Wis. (4/8/11)--Credit unions nationwide are preparing to serve members with urgent financial needs in the event of a federal government shutdown at midnight ET today. Federal agencies cannot operate without spending authority provided by Congress, and that authority expires tonight for most agencies. The shutdown could keep as many as 800,000 federal employees from working--and from receiving paychecks at least temporarily. The National Credit Union Administration (NCUA) Thursday issued a letter urging credit unions to remain ready and flexible to address the financial needs of federal workers and other individuals affected by any impasse on federal spending. For more details, please use the link. Credit unions reported to the Credit Union National Association (CUNA) Thursday that they are well-prepared to meet members’ needs. “We continue to receive reports of credit unions readying skip-a-payment options, temporary 0% financing and other special programs to help the federal employees in their membership cope if there is a government shutdown,” said CUNA President/CEO Bill Cheney. “Credit unions are owned by the members they serve. This is a great example of credit union philosophy in action--stepping up to help their members when their members need them most.” Labor Dept. FCU, Washington, D.C., is offering members 12-month loans up to $3,000, with the first 60 days interest free in the event of a government shutdown. “We call it a payroll disruption loan,” CEO Joan Moran told News Now
. “If payroll does get stopped, members can keep their day-to-day living expenses going. Once payroll gets started, they can pay us back. Hopefully, without interest.” Moran said members have contacted the credit union, mainly to inquire about access to service if the government shuts down. The credit union’s Web home page features a red banner with bold white lettering, “In case of a government shutdown, we’ve got you covered.” One click away is a list of access options that includes e-mail, courtesy pay, online banking and shared branching. The Department of Labor has given credit union employees permission to access the Frances Perkins Building if there is a shutdown so the credit union can provide members with essential services. As the CEO of a credit union that serves government employees, Moran said her credit union is prepared for a shutdown. “We’ve been watching this for months,” she said. “I think we first started talking about it in January. We’ve been building up liquidity so we can provide funding however it’s needed.” At HEW FCU, Washington, D.C., any loan payments made by government payroll will be skipped for the next payroll period if there’s a shutdown, according to CEO Kathy Geary, who said the credit union would re-evaluate the policy before the next payroll. Members with direct payroll deposits can also obtain interest-free loans and pay them back when they resume their jobs. If they wish to carry the loans longer, the terms are 3% for three months or 4% for six months. Members were relieved when they learned the credit union was providing some financial relief, Geary said. “A lot of them said, ‘A bank wouldn’t do this for us,’” she added. Geary said HEW FCU was much better-prepared because the credit union went through another government shutdown in 1995-96. “We pretty much took out the boxes from 15 years ago, dusted them off and looked at what we could apply to members today,” Geary said. Cabrillo CU of San Diego is offering 0% loans to members on direct deposit from the federal government. Loans not paid when the furlough is lifted convert to 12-month loans with 7% annual percentage rate (APR). Cabrillo CEO Robin Lentz said her credit union had not received many inquiries as of Thursday morning, but she expected that to change as the deadline approaches. Like HEW FCU, Cabrillo CU went through a government shutdown in 1995-96. Lentz is most concerned about the impact the shutdown will have on her staff, which could be inundated with urgent requests from stressed out government employees. “We have more automation now, which helps, but last time we were overwhelmed,” Lentz said. Frederick. Md.-based COMSTAR FCU’s contingency plans for the federal government shutdown/furlough include: loan payment modifications, such as temporarily reduced payments, skipped payments or interest-only payments; a low-rate shutdown/furlough loan to tide workers and their families over until paychecks resume; and additional staffing at branches that will remain open during a shutdown/furlough. The credit union also is offering a furlough information line staffed with trained personnel to assist workers with specific questions and problems. Jennifer Stillrich, marketing and training manager at COMSTAR FCU, said it’s helpful that some of the credit union’s branches are located outside of federal buildings, so they can stay open in a shutdown. “We know from experience that when the federal buildings are closed, it’s a lot harder for everyone,” she said. Other efforts from credit unions serving federal government employees include:
* NASA FCU, Upper Marlboro, Md., is offering federal government members, including contractors, a 0% interest paycheck and furlough relief loan to cover delayed paychecks or furloughs. * Interior FCU, Washington, D.C., is running a $25 membership promotion and will offer a 0% line of credit for 15 days. * At Transportation FCU, Washington, D.C., furloughed employees can skip up to two monthly payments per loan on consumer loans and credit cards. The credit union also offers a “FurDough” loan of up to two weeks of net pay, up to $3,000 at a 4.5% APR for up to 18 months with a minimum payment of $25; * At Associated CU, Norcross, Ga., government employees using direct deposit can apply for 0% interest loans in the amount of their last direct deposited paychecks. If the balance cannot be paid within the 30 days after government payrolls begin, loans will be converted to 12 months at 5.5% APR.