Credit unions' ties to counseling services growing closer

COLUMBUS, Ohio – Nearly a year ago, when Nationwide FCU in Columbus, Ohio, sent its first announcement over the intranet of Nationwide Insurance, its members’ employer, that it was offering a class on financial budgeting and management, it got 50 attendees, capacity, within an hour. It eventually filled four such sessions. “I am seeing more and more evidence of financial stress within our membership,” said Paula Edwards chief executive of the NFCU. “We’re seeing more and more members who are financially sluggish.” In addition to teaching the classes, the non-profit Consumer Credit Counseling Service of the Midwest, also based in Columbus, has installed a full-time credit counselor in the office at Nationwide, thanks to a grant from the credit union. The CU offers the one-on-one counseling free to its members and, whenever a member is denied a loan, the member is referred to the counselor. “Instead of just saying no, we’re saying, no, but.” explained Edwards. “We have seen our partnership with credit unions grow,” said Michael Kappas, president of CCCS of the Midwest. His organization is a member of the National Foundation for Consumer Credit, the oldest federation of non-profit counseling services in the country. The group has approximately 175 members who operate 1,400 offices across the country and in Puerto Rico. The organization’s president, Durant Abernethy, spent 15 years in the CUNA legal department, rising to senior vice president and general counsel when he left in 1993. Elsewhere, for example, Mazuma CU in Kansas City has a credit counselor available at its office five days a week. Wisconsin Credit Union Shared Services, which operates three service centers in the state, allows members to use counseling services. And in San Antonio, Andrew Cuellar, director of education for the Consumer Credit Counseling Service of San Antonio, said several area CUs now provide office space for his organization. The number of CUs collaborating with counseling services to offer budget advice isn’t known. Mark Wolff, CUNA senior vice president of communications, said that a recent CUNA survey found that 30.8% of the CUs surveyed offered some sort of counseling. Some larger CUs have a staff counselor, Wolff said, and that some state CU leagues are encouraging relationships with counseling services. These relationships may take on greater importance when, or if, bankruptcy reform legislation takes effect. The legislation now in Congress obligates debtors to seek financial counseling before they can go through bankruptcy. “There may be hundreds of thousands of people who will need some kind of credit counseling service so they can file for bankruptcy,” said Kathleen O. Thompson, senior vice president and associate general counsel of CUNA. At Nationwide FCU, the relationship began in December 2000. Nationwide has $315 million in assets and 45,000 members, 8,000 of whom work in a company complex in downtown Columbus. It has several branch offices, including one in Raleigh, N.C. During the first six months, said Edwards, the counselor met with 151 members and conducted 27 classes. Many of the classes were on basic budgeting issues designed to help members establish short or long-term financial goals. Other sessions covered credit reporting and how to resolve errors, and others were designed to help members understand credit and debt management. The individual sessions also covered basic budgeting issues but also helped resolve mortgage delinquencies and put members on more stringent debt management programs. Because employees are scattered, the counselor also offers assistance over the telephone Debt-management programs, which allow people to avoid bankruptcy, are the traditional heart and soul of counseling services. They put clients teetering at the edge of the financial brink on a budget and repay their unsecured debts, often negotiating with creditors over terms of either full or partial debt satisfaction. Though unlike bankruptcy reorganization, creditors are free to accept or reject a repayment plan created by the counseling service, which often repay a larger percentage of debt than under court-ordered reorganization. For this service, the non-profit services ask creditors for what they call a “fair share,” a small percentage, between 8% and 15% of moneys recovered. In recent years, creditors have been reducing that percentage. Credit unions and counseling services have typically never had a strong relationship. In fact, NFCC’s Abernethy, a former CUNA executive, said when he joined the foundation, he “found the credit unions one of the least supportive of creditors because they view their debt as secured debt,” since credit unions viewed their loans as secured by credit union membership shares. That relationship may be changing. Said CUNA’s Thompson, “We have certainly discussed internally and have mentioned to the national foundation (of consumer credit) that we need to sit down and think through what further commitment or encouragement (to make to) individual counseling agencies.” – [email protected]