MORE THAN 70 CUs HAVE TURNED TO COUNSELING SERVICE
The Credit Union Journal
November 19, 2001

By Tina Carlson, Reporter

San Francisco - Credit unions have a proven track record of aiding financially stressed members, but often there is little they can do for those pressured into bankruptcy by inflexible commercial lenders.

As jobless claims in this country hit a level unseen in a decade, the "people are worth more than money" philosophy is driving some credit unions to seek alternatives to traditional consumer aid programs.

"Credit unions have been frustrated for years with the level of service they got from the CCCS offices and the lack of input designing programs," said Joanne Budde, president of BALANCE, a financial counseling service. "They didn't know what happened if they referred a member there."

BALANCE offers a hotline number answered by "a live person" 15 hours a day, a monthly usage report and refers members back for products, Budde noted. In addition, it trains CU staff to sensitively promote the service.

The program is designed to step in long before people find themselves discussing bankruptcy, she continued. About 70 credit unions use the program nationwide.

"What we have found is that typically people wait a year or two struggling with bills before they are in trouble so they are not embarrassed, so that they know that there is a service to call."

The company surveyed 1,000 people it counseled who were experiencing financial troubles between one and three years ago and found that today 40% have started investment plans and 17% bought homes, said Budde.

The biggest service is negotiating with creditors to work out a temporary repayment plan, Budde added. "That's great that the credit unions are making all those concessions, but all it takes is one creditor to lean on somebody and that will push them to bankruptcy," she said.

North Island Financial CU, San Diego, just completed its second year with BALANCE. Bob Campbell, VP lending administration, said the first year was spent getting staff used to having some good news to share with members.

"People couldn't normally help with additional loan products." Campbell explained. "And that's primarily why we went with BALANCE, to give people an option other than filing bankruptcy and to give them an opportunity to get out of debt without completely destroying their credit."

Campbell said he found that while the CU defers payments and interest rates, that didn't help the member's overall budget because other creditors were not so benevolent.

"As a result the member only saw one way out and that was to file bankruptcy, and we all lose," he related. "BALANCE has gone into agreements with the major credit card and department store grantors of credit and negotiates to a particular level and actually creates a budget for individuals to where they are paying something other than interest."

Kerry Klewer, loan control manager of Seattle Telco, said the cost of having a financial counselor on staff doesn't make sense for the $330 million, 58,000-member CU. "The cost for BALANCE is a great alternative," Klewer said. "Our collections department uses it a lot as a referral. It kind of bails people out of trouble."