Credit unions scramble to cope with the coronavirus pandemic.
Business continuity planners and enterprise risk managers may not like to hear this, but they have a lot in common with reporters, those people who stick out their recorders and ask tough questions politicians and business executives don’t want to answer.
The work of planners, managers and reporters is all fueled by the same thing: bad news.
The difference is that credit union managers work long hours and go to great lengths—with planning sessions, tabletop exercises and data-flow diagrams—to try to minimize the impact of the bad news.
The past year has seen credit unions serving areas lashed by tornadoes, hurricanes, wildfires, earthquakes, floods and massive snowstorms that have driven many to put their continuity plans into action. But this spring has been like nothing most have experienced before, as the coronavirus pandemic has forced all CUs, wherever they are located, to shift their plans into gear.
A pandemic is a unique type of disaster. It hits people, inside the organization and out, while leaving offices and infrastructure untouched.
“In a natural disaster, you assume that your infrastructure and your technology have all been impacted, so recovery becomes a matter of, ‘How do we get our systems back up and running?’” says Tom Hinkel, VP/compliance services at Safe Systems Inc., a technology, compliance and security service provider based in Atlanta. “How do we restore this server? Or this data circuit? It’s all about the physical stuff.”
But in a pandemic, the equipment is all fine. “The technology is there, but maybe you don’t have enough folks to keep it running,” says Hinkel, who provides consulting services to credit unions.
“We’ve done pandemic testing for years, and what we do is assume 40% of the workforce is not available, either because they are ill or because they are caring for a family member.”
The tests involve a random draw of 40% of the names, so in some scenarios “you may wipe out a loan department, while your tellers and CSRs may not be affected,” he explains.The core of a continuity plan is highlighting danger points where workflows, as well as data or information flow, can be disrupted. Coping with any disruption involves identifying other staff who can fill in or providing cross-training so people can perform a number of roles.
Service at a Safe Distance
When the coronavirus hit the U.S. and Canada in early March, the challenge for some credit unions was to move staff out of their offices and into their homes so they could continue to work while reducing the risk of spreading the virus.
VyStar Credit Union, based in Jacksonville, Florida, moved quickly to shift staff offsite, says President/CEO Brian Wolfburg, a CUES member. The $9 billion credit union has 2,000 staff, and by late March, 80% were working remotely. All but 100 of its 1,300 back-office staff were working from home.
A major challenge has been dealing with the changing information about the virus and evolving government plans to combat it. Some states moved slowly, then sped up with orders to limit social interaction when the number of cases rose. But even then, the response has varied widely from state to state. This has left a few credit unions acting on their own; for example, some in Seattle—one of the hardest hit spots initially—closed branches while others did not.
Wolfburg says VyStar CU was the first financial institution in northeastern Florida to close its branches and go strictly drive-thru, and not all members were happy with the move.
“We were out there by ourselves for a few days. … Slowly other local institutions have done it, but we still have some banks that [as of the time of writing] have not made that change,” he reports. “People have said, ‘I’m going into my supermarket or Walmart and I’m standing in a line of people, and that’s OK, but I’m not allowed in your branch?’”
The move to drive-thru-only service was also challenging for the credit union because it led to long lineups that forced staff to act as traffic directors for angry and frustrated members.
New York City is the hardest hit city center city in the U.S., with—as of this writing—a continually rising number of COVID-19 cases and deaths. $9.4 billion Bethpage Federal Credit Union, headquartered in Bethpage, New York, on Long Island, has closed six branches, while 28 others remain open either as drive-thrus or by appointment only. Similarly, $7.5 billion Teachers Federal Credit Union in Hauppauge, New York, also on Long Island, said teller transactions could only be done via exterior ATMs, drive-thrus, online or mobile. Members can make branch appointments for services that cannot be done remotely.
Patelco Credit Union in Dublin, California, has moved its head office staff to working from home, but its branches are open, except for one that was closed because the building it is located in is closed to the public due to the governor’s “stay-at-home” order.
“Team members at the branches have implemented social distancing, safety and sanitization protocols during open hours,” says Suzanne Rumsey, VP/talent for the $7.2 billion credit union. “We are providing gloves to the branches. We also have increased deep cleaning and disinfection of our facilities.”
In the recent past, Patelco CU’s service area has been hit by wildfires and by PG&E’s decision to cut power to reduce the fire danger (Pacific Gas and Electric). But that experience didn’t prepare it for the pandemic.
Unlike those situations, “we had to face the sizeable challenge of ensuring the vast majority of our headquarters-based workforce could effectively work remotely from home,” says CUES member Erik Welch, VP/centralized operations. “A large cross-functional team worked diligently to ensure that each team member had the tools, software and critical training needed to complete their job functions remotely while providing an excellent service experience to the membership.”
Wolfburg said VyStar CU had no cases of the virus but did have individuals who were staying home out of an abundance of caution. He said branch activity was down 40%, but call-center numbers were up 20%.
The credit union has gone out of its way to reassure staff by “guaranteeing that we will not be letting go of any staff, or reducing staff, and that we will always pay our staff,” reports Wolfburg. That communication has built up employee trust and encouraged staff to take the virus seriously by making them feel comfortable taking the necessary steps to stop its spread—without anxiety over job security.
The Challenge Unfolds
The threat of pandemics is not new. After the H5N1 flu hit in 2006, the National Credit Union Administration told credit unions in 2007 that they needed a pandemic plan alongside their business continuity plan. But last November, NCUA dropped the requirement for a separate plan, instead telling credit unions they should treat pandemics like any event identified as low probability but high impact.
The Federal Financial Institutions Examination Council also noted in November that, since 2007, credit unions have placed a greater reliance on outside suppliers for many services. As such, the council said that current continuity plans need to ensure those suppliers have the capacity to handle emergency events.
“The real challenge for credit unions is they have got to manage their own operations and their employees, just like any other business, and make sure of the safety and well-being of their employees. And yet, at the same time, their mission is to help their members—and in times like these, members need more help than ever,” says Steve Salzer, SVP/legal and enterprise risk at CUESolutions provider PSCU, St. Petersburg, Florida, a payments services CUSO whose 2,100 employees serve 1,500 credit unions.
Credit unions are having to meet this challenge in a hurry as they respond to COVID-19.
“I don’t think many credit unions factored in having so many people work from home,” says Brad Smith, managing director of CUES strategic partner Cornerstone Advisors, Scottsdale, Arizona. “A lot of pandemic plans look at what happens if 30% of your employees can’t come in. I have a small $300 million credit union that has 97% of its employees working remotely.”The credit union is thriving because it had invested heavily in digital and now has only a handful of people coming into the office.
Smith warns that CUs may face additional challenges soon, if not immediately: “What happens when your employees are having to monitor the health of their children, or an elderly relative? One of the lessons learned from Hurricane Katrina is that in extreme conditions, people will always focus on family before their job. And if that means losing their job, some folks will consider that.”
In late March, NCUA Chair Rodney Hood sent a letter to credit unions urging them to do their best to help members who faced layoffs or lost wages due to the pandemic.
“I want to assure you that the NCUA’s examiners will not criticize a credit union’s efforts to provide prudent relief for members when such efforts are conducted in a reasonable manner with proper controls and management oversight,” he wrote. “The NCUA encourages credit unions to work with affected borrowers. A credit union’s efforts to work with members in communities under stress may contribute to the strength and recovery of these communities. Such efforts also serve the long-term interests of impacted credit unions.”
These efforts may include:
- Waiving ATM fees, overdraft fees, early withdrawal penalties on time deposits, late fees for credit card and other loan balances
- Easing credit terms for new loans for members who qualify
- Offering or expanding payday-alternative loan programs
- Increasing credit card limits for creditworthy borrowers
- Offering payment accommodations, such as skip a payment
Wolfburg says VyStar CU is using the full arsenal of these aids to help its members cope. The credit union has many members in the military and government, so it is familiar with developing assistance packages, as it has in the past when member pay was held up by disputes or shutdowns.
For example, VyStar CU has deferred all consumer loan payments for two months. Wolfburg notes that as the virus hit, the number of calls seeking loan deferments went from 10 to 400 a day, so the credit union decided to be proactive in offering the two-month deferral across the board.
“People don’t have to worry about it,” Wolfburg says. “They don’t have to invest the time to ask for a deferment; they don’t have to be ashamed about asking for it. We just moved all payments. No one owes a consumer payment until June.”
Welch reports that Patelco CU members’ top two needs are currently “loan payment deferrals and obtaining emergency funds. Patelco has made it easy for members to complete a self-serve skip-a-pay request online, enabling them to quickly skip one month’s loan payment on most consumer loans and credit cards.” He adds, “Members needing emergency funds to pay bills and buy needed household goods are able to apply for an interest-free emergency loan of up to $5,000, with generous repayment terms.”
Business Continuity Preparation & Recovery
Hinkel of Safe Systems Inc. reflects that a lot has changed since 2007 and the last discussion of pandemic plans. “It was only 13 years ago—but that was ages ago when it comes to technology.”
He notes that most CUs are not early adopters of technology and therefore didn’t offer electronic services back then. “They are driven by member demands, and if the members weren’t demanding it, they weren’t implementing it,” he acknowledges.
But now all—or nearly all—credit unions offer internet banking and remote capture of checks, and many have smart ATMs.
“Access to funds has changed from a face-to-face transaction to an electronic transaction, but that’s what customers are used to these days,” Hinkel says. As such, the role and importance of the business continuity plan is growing as credit unions become more complex and natural disasters become more frequent.
“In the past, you might have had one individual who was assigned the responsibility for the business continuity plan and making sure it got updated and tested every year, and it became a routine,” says Hinkel. “Now, I think everybody has to own a piece of it, because there are lessons learned up and down the management chain.”
Once the initial pandemic turmoil settles down, the challenge for credit unions will be helping their members recover financially.
Smith says credit unions need to start thinking about what they need to do to mitigate their exposure to delinquencies and bad debts. They’ll also need to reprice products to attract deposits.
“The next wave that I see is credit unions being proactive on the financial and risk mitigation component and reaching out to business borrowers,” predicts Smith. “There are no easy answers—we’ve never been through anything like this.”
Wolfburg is confident that VyStar CU can weather the pandemic storm. He says the credit union will save money in some areas—travel and conference spending are gone, for example—and postpone some projects and marketing plans. Depending on how quickly the economy bounces back once the spread of the virus slows, he believes the CU can hit the financial targets it had in January.
There could also be a silver lining in the midst of all this for credit unions: How they serve members during and in the wake of the coronavirus pandemic will give CUs a chance to highlight how they differ from banks.
Credit unions need to say: “We will do whatever it takes to accommodate you. Just reach out to us, talk to us and let us know what you need,” Hinkel advises. “That is the credit union difference—it’s always been the personal touch.”
But for now, that personal touch may take on a socially distant, high-tech look.
“We pride ourselves on face-to-face service, knowing the member. We can still treat them with the kind of attention they are not going to get at a big institution, but we don’t need to have a face-to-face interaction to do that,” Hinkel says. “A voice-to-voice interaction can accommodate exactly the same thing.”
Salzer of PSCU has similar advice for credit unions looking for the best path forward: “Instead of coronavirus, we need an outbreak of caring-virus. … Let’s go viral with caring about our fellow man during a process like this—and of course, that’s what credit unions are all about: people helping people.” cues icon
Art Chamberlain is a writer based in Campbellford, Ontario, with almost 15 years of experience working with and writing about credit unions.