Credit Union Role Pivotal in "Windfall" Aid to Consumers in Failed Utah Agency

SALT LAKE CITY – With the Utah media riveted to what’s going on in the legislature this month tied to that bank/credit union clash over taxes, what got overlooked, say CU leaders, is the prominent role CUs have played in the financial rescue of consumers relating to the collapse of a scandal-ridden credit counseling firm. Indeed, the failure of the Consumer Credit Counseling Service of Utah has been in the headlines for nearly a year amidst allegations of mismanagement and lost funds, but CU executives here and in California point to exceptional steps made by a San Francisco agency and Salt Lake CUs to “bring integrity to the name of credit counseling.” “We saw an opportunity in Utah to help people get their money back and at the same time this speaks to our non-profit role in the community,” explained ex-CUNA Chairman Barry Jolette, and newly elected chairman of Balance, a personal finance and counseling service which uses a long distance phone hotline to aid consumers avoid bankruptcy. Balance, founded in 1995 and which lists 200 CUs nationwide as subscribers to its education and counseling service, is a subsidiary of Consumer Credit Counseling Service of San Francisco, which is unrelated to the defunct Utah firm. What occurred last month-and what has been mentioned as a message to legislators of what might be lost “without credit unions in the marketplace”-is a $30,000 “windfall” paid to Utah consumers who lost money to CCCS of Utah, once billed as a non-profit debt management agency. Appearing at a Salt Lake press briefing arranged by the Utah Division of Consumer Protection, the president of Balance, Joanne Budde, said the decision to “make Utah consumers whole” through payment refunds was to lift consumer trust for reputable counseling agencies like Balance. “We don’t want one agency to destroy the trust developed and the good reputation we’ve earned during the past 40 years,” she declared. “Our original intention was to make everyone whole, and we believed the amount of claims might come close to $50,000,” said Budde. Following up on the issuance of the Balance refund checks paid by the state, some participating CUs in Utah have been providing the Balance services to their members for free. There are eight Utah CUs on Balance, said Budde, with two more Utah Community FCU and University of Utah FCU, signed up and slated to start soon. “Because these credit unions turned to Balance as a solution for their members when the local CCCS office failed, we felt we owed it to the community to give something back to the community that had trusted us,” Budde told Credit Union Times. Also, she said, Balance gave the grant “as much for families in the future, who might find themselves faced with financial problems, and we didn’t want the message sent out that if you turn to a counseling agency for help, you may lose your money.” Balance, she went on, “didn’t want families to refuse to seek help, and file bankruptcy, needlessly.” In California, Jolette, who also is president/CEO of San Mateo Credit Union in Redwood City and the first CU client of Balance in 1997, said the leadership of CCCS and Balance saw no problem with “shelling out the funds” in Utah as a means of “creating something good to happen for consumers after they experienced such fraud and bad management.” The former president of CCCS of Utah, Scott McCagno, is appealing court fines of $45,000 handed down last year by the Division of Consumer Protection for allegedly concealing and mismanaging the funds of the non-profit organization. Budde, the Balance president who maintains the organization has a strong CU bias in serving those institutions because of their counseling performance, cited the severe political problems facing Utah CUs now in their fight with banks and on that score, “we hope to be able to help them.” “At a time when banks are cutting support of credit counseling and forcing consumers to pick up more of the tab to get help, credit unions are partnering with Balance and picking up the tab, to ensure their members pay nothing for our services,” she said. In addition to Utah Community and University of Utah FCU, other Balance clients in Utah are Mountain America FCU, Goldenwest FCU, plus Cyprus FCU, Granite FCU, Jordan FCU, Deseret First FCU, Tooele FCU and Alliance CU… Budde maintained that Balance continues to add “partners” in Utah and elsewhere because “we work with credit unions to develop specialized programs to support salary advance programs; overdraft privilege, loan extensions for members faced with job loss and hardships and second chance checking programs.” Budde acknowledged that the collapse of the Utah agency does reflect continuing turmoil in the industry with incidences of predatory practices on the rise at firms that collect large upfront fees from panicky borrowers One new Balance client here, University of Utah FCU, said it was planning to launch Balance “within 60 days” using its own Web site to promote the free service. However, it was uncertain if the public really understands the wide-ranging role Utah CUs play in assisting their members in financial education, said Tammy Morgan, vice president of administrative services at UofU. “I’m sure this is something the bankers are playing down in the current fight and is something they don’t want the public to know,” said Morgan. “The bankers ignore the positive and go for the negative.” [email protected]