Patterned after previous disaster assistance programs, ‘pandemic loans’ and payment deferrals are in big demand.
Credit unions across the country are acting quickly to support members dealing with income loss resulting from pandemic business shutdowns by promoting special loan programs, payment deferrals and loan modifications—and members are taking them up on those offers.
The terms of these loans are patterned after disaster assistance programs rolled out in the wake of natural disasters but adapted in recognition of the likely wider and longer-term economic impact of this medical emergency. The following sample describing emergency loans and other member supports illustrates the primary aims of credit unions’ response as the financial punch of the pandemic starts to strike home.
Focus On The Needs Of Existing Members
ORNL Federal Credit Union launched its pandemic/state of emergency assistance loan program March 18 and, in less than a week, had approved $340,000 in short-term, unsecured loans to assist members negatively impacted by the pandemic.
The loans are available to borrowers who’ve been members for at least 90 days and are in good standing with the $2.35 billion Oak Ridge, Tennessee, credit union serving 174,000 members. Borrowers have up to 90 days to make the first payment, pay no interest for the first six months and are charged a 3% fixed rate thereafter, with up to four years to repay.
The maximum loan amount is calculated on a four-tier sliding scale based on members’ Beacon credit scores. Those with a 720 or higher score qualify for four times their gross monthly income, Chief Loan Officer Derek Saidak explains. At the other end of the scale, members with a score of 639 or lower could borrow an amount equal to their gross monthly income.
ORNL FCU, originally formed to serve members of the Oak Ridge National Laboratory, patterned the loans after a similar program for furloughed federal employees. In the most recent iteration of that emergency assistance program, the credit union made about 30 loans totaling $50,000 in January 2019.
“This program encompasses more members and is designed to last longer in recognition that the financial impact of the pandemic may be much deeper,” says Saidak, a CUES member.
The streamlined requirements help generate loan decisions quickly, typically in less than an hour. Loans can be closed remotely using Docusign, Seattle, and funded directly into members’ accounts, though some members have been stopping by a branch to complete their loans.
In addition to this program, ORNL FCU is working with existing borrowers across the communities it serves in 16 counties in east central Tennessee to offer up to 90-day extensions on auto and other consumer loans with a verbal confirmation that their finances have been negatively affected by the pandemic.
With a slowdown in branch visits as members shelter in place, the credit union has redeployed some staff to its call center and collections department to keep pace with the anticipated steady demand of members requesting new loans and extensions, Saidak notes. Some physical job reassignments have also been made to ensure that subject matter experts and their backups are not working in the same locations.
Facilitate Remote Member Service
$1.9 billion Partners Federal Credit Union with 180,000 members is serving employees of the Disney corporate family in California and Florida, a hard-hit industry into two hard-hit states, with a range of supports including special loans, payment deferrals and enhancements of its digital channel to help members manage their finances remotely.
Partners FCU’s member assistance program was introduced 15 years ago to help members affected by natural disasters like earthquakes and wildfires and such crises as the 2017 mass shooting in Las Vegas, says President/CEO John Janclaes, CCD, but the current requests for assistance will significantly eclipse demand during those events.
In its current form, the program offers members dealing with pandemic-related financial setbacks short-term unsecured loans for up to $1,000 at no interest for up to 24 months. In the first two weeks those loans have been available, 1,500 were approved.
Other supports on the member assistance program site include the option to skip a payment on a consumer loan or credit card, mortgage payment deferrals for up to 90 days, waivers on penalties for early CD withdrawals and an increase in the daily remote deposit limit from $5,000 to $15,000. An analysis of that final change shows that 95% of the credit union’s deposits could be made via mobile app rather than a branch or ATM visit, notes Janclaes, a CUES member. Those options are anticipated to be available through April 30.
Partners FCU has also rolled out a new way for members to consult with financial professionals via its virtual branch queue, available right from the CU’s home page. Members can request a phone conversation or email response on specific topics by selecting and supplying some basic details. Some of those calls may be fielded by branch staff working from home on laptops for now.
Be Quick, Be Clear
UW Credit Union rolled out emergency personal loans for existing members on March 16, up to $2,500 with no payments or interest in the first 90 days. For those who need longer to repay, the loans will have a fixed rate of 1.9% for terms up to 36 months. In first week, UW CU funded $1.1 million in loans, and a dedicated staff of seven lenders is working full-time to keep pace with demand, says Mike Long, EVP/chief credit officer of the $3.4 billion Madison, Wisconsin, credit union serving 270,000 members.
The program is similar to the temporary hardship loans issued in the depths of the Great Recession in 2008-2009 and during major floods in Wisconsin in 2018. “It was easier for us to mobilize because we’d already built this loan product within the loan system, and we already had the documentation identified,” Long says. “Once we knew this was going to progress into a pandemic and have a big impact, we were able to get it up and running on our website. Our teams were already trained on it.”
The emergency loans are taken with UW CU’s standard application and processing but underwritten based on members’ income prior to the pandemic shutdown. The loans typically are completed electronically, from application through closing and funding, he notes.
Amid all the uncertainty around the pandemic and the local, state and federal response, UW CU has sought to offer clear and straightforward information about its emergency personal loans through a list of frequently asked questions available online. The FAQs cover questions like “What does the statement ‘Same interest rate no matter credit score’ mean?” and “Is it normal to make a loan to someone who no longer has a job?”
In addition to those loans, UW CU is offering members in need loan extensions up to six months for auto and installment loans and plans to extend similar assistance on real estate-secured loans and credit card accounts soon.“This is the time that our credit union needs to stand in and help members as they work to figure out how their finances are being affected by the pandemic,” Long says.
Listen To What Members Need
In assessing how to support members as the COVID-19 pandemic unfolds, “we’ve looked at products and procedures used in past disasters like hurricanes and storms, though no one has ever seen anything like this,” says CUES member Ricky Otey, EVP/chief operating officer of $1.6 billion Sharonview Federal Credit Union with 89,500 members, Fort Mill, South Carolina. “It’s unprecedented what the demand and need will be for our membership.”
Sharonview FCU’s digital and online channels and member experience center for phone interactions offer “great listening posts” to assess members’ needs, Otey says.
Based on member input and inquiries, the credit union now offers payment deferments at no fee for up to two months on all consumer loans, including car loans, credit cards and other unsecured loans. In addition, fees on outgoing wire transfers, overdrafts and some late charges will be waived as members manage their finances during the crisis.
The loan payment offer is posted on the Sharonview FCU website with an invitation for members to call the 800 number to request that relief. The pandemic response will also be outlined on statement stuffers, Otey says.
“One of the things I do think is important during these kinds of situations is communication,” he adds. “When a member makes that request for a payment deferral, we’ll be very clear about what is going to take place and what the timeline will be, so there’s transparency and clear expectations.”
The emphasis on communication extends inside the credit union as well, via daily calls with the executive team and management about staffing preparations and processes to gear up to meet remote demand for member service.
Sharonview FCU managers are currently planning on responding to regulatory calls to offer short-term loans for members dealing with temporary job loss, deferments on home-secured loans that comply with recent regulatory guidance, and the possibility of raising daily ATM withdrawal limits so members have ready access to their funds.
Implementation of a liquidity flexibility strategy with more portfolio loan sales over the past six months has positioned the credit union with more balance sheet flexibility to respond for increasing loan demand, Otey says.
“On the downside, the yield curve is not our friend now, so while we have excess liquidity, there are not a lot of places to invest” with an eye toward income growth, he adds. “But the most important thing right now is that we have significant liquidity to handle loan requests from members.”
Keep All Hands On Deck
SELCO Community Credit Union rolled out its income disruption loan on Friday, March 20, and staff worked through the weekend from home to “help members receive funds more quickly,” says Colleen Thompson, director of marketing for the $1.7 billion Eugene, Oregon, credit union serving 145,000 members.
In the first four days after introducing the loans, SELCO Community CU received 325 applications. The loans are available to existing members for up to $2,500 with no payments for six months with up to 18 months to repay at 2 percent interest. In addition, the credit union is offering no-fee, skip-payment options on vehicle and personal loans and credit cards for qualifying members, even if they’ve already used the standard option to miss a payment, and staff are working with HELOC borrowers on an individual basis on deferral options.
“We’re receiving an outpouring of positive feedback from our members on the phones, chat sessions, and social media. Clearly this accommodation is both needed and appreciated,” Thompson notes.
The loan center team has been processing most income disruption loan requests through the auto-approval system as they come in by phone and the web, and team members from other areas have been marshaled to help process and fund the loans.
With its branch lobbies closed, SELCO Community CU has adjusted some self-service channel policies and processes, such as increasing the maximum deposit amounts through remote deposit capture and has “moved nearly all our in-branch services to our drive-up windows,” Thompson adds. “We can now issue cards, process cashier’s checks and money orders, and even complete loans at drive-ups.”
Acknowledge The Uncertainty Of An Unprecedented Calamity
$550 million Enrichment Federal Credit Union, Oak Ridge, Tennessee, with 45,000 members, rolled out a range of supports for members on March 23:
- The option to skip payments on consumer, mortgage and business loans for up to three months;
- Loan modifications for up to three months;
- Forgiveness of late payment, non-sufficient funds and overdraft protection fees; and
- A no-interest 30-day loan up to a maximum of members’ monthly net income, which can be extended for an additional 30 days at no cost. Members must provide verification of income before pandemic-related layoff or reduction in hours.
The special loans are available to existing members in good standing without a credit check if they’ve been with Enrichment FCU for at least 90 days, says CUES member Felicia Langley, AVP/consumer lending. For memberships opened less than 90 days, credit qualifications apply.
Consumer credit card limits were also raised by $1,000 across the board.
The credit union rolled out these member supports quickly. Its executive team met March 16 to develop the plan and then passed it on to managers with a question: How quickly can we get this done?
“By Friday [March 20], we had it live and opened it up for employees to ensure it worked properly,” Langley says. “On Sunday afternoon, there was an email to all our members informing them we were offering major assistance. We started first thing Monday morning, and it’s been nonstop since then.”
In addition to working with colleagues to develop new procedures and guidelines, Langley also did a lot of testing with IT to make sure the loan processing and core systems would permit pushing back due dates on loans by up to three months. Previously, the core system (Symitar – A Division of Jack Henry) had only been set up to allow one-month skip payments once a year.
To keep pace with current demand, Enrichment FCU has expanded drive-through hours at its nine locations to 8 a.m. to 7 p.m. weekdays and 9 a.m. to 2 p.m. Saturdays. (Previously its hours were Monday through Wednesday 8:30 a.m. to 5:30 p.m.; Thursday and Friday 8:30 a.m. to 6 p.m. and Saturday from 8:30 a.m. to noon.)
The CU continues to have a 24-hour call center, outsourced to CUESolutions provider PSCU, St. Petersburg, Florida .
Branch lobbies are closed except for appointments for mortgage closings, documents that required notarized signatures or a medallion guarantee, and safe deposit box visits.
Tellers are rotating shifts throughout the day at busy drive-through stations, and other employees have been assigned to staff phones. “It’s definitely all-hands-on-deck, but we’re making it work,” she says.
Members dealing with a sudden reduction in work hours or a layoff have been grateful for their credit union’s assistance. “It makes what you do feel so worthwhile,” Langley says.
With all the uncertainty about how long the effects of the pandemic will persist, “we didn’t put an end date on this,” she adds, so Enrichment FCU may extend or enhance its offerings for members in the future.
Karen Bankston is a long-time contributor to Credit Union Management and writes about membership growth, operations, technology and governance. She is the proprietor of Precision Prose, Eugene, Ore.