WestStar CU Bucks the Odds, Wins Big with Second Chance Checking Program

LAS VEGAS – Leave it to a Las Vegas-based credit union serving the gaming industry to gamble on members with ChexSystems records. WestStar Credit Union, which serves employees of casinos and other gaming companies, found the odds were stacked against a traditional checking account program effectively serving their members. In order to meet the needs of members with ChexSystems records, they developed a 2nd Chance Checking Account. “Our Field of Membership includes all gaming companies within the state of Nevada, and many people within that industry are credit challenged and have had problems with checking accounts in the past,” said WestStar President/CEO Dan Paulson. “Because all institutions check your record and most won’t work with you if you’re on ChexSystems, we came up with this program to allow a person to open a 2nd Chance Checking Account with us,” Paulson added. “We’ve had the program going for five years, and it’s been very successful.” While many institutions won’t even open a savings account for consumers with any ChexSystems record whatsoever, WestStar will open both a savings and checking account for nearly all records. The only record forbidden by the policy is fraud. All other records – ATM abuse, unsatisfactory handling, excessive NSF activity and retail indicators – are allowed under the account guidelines, provided the records are not excessive. However, members with ATM abuse records are not issued Visa Check Cards. 2nd Chance Checking Accounts are also offered to current members who have had WestStar’s regular checking account closed due to excessive NSF activity or bad handling, or have had paid a charged off amount owed to the credit union. Heri Garcia, Training and Development Manager, said exceptions to the policy are allowed on a case-by-case basis. “Whether or not we open the account really depends upon the person’s history,” Garcia said. “For example, I consider anything over three records to be excessive,” he said, “And even then, that doesn’t mean we won’t open an account for them. At that point, we will look further into the situation, discuss it with the member, and base our decision upon that.” To offset losses, the credit union charges a $10 monthly fee, flags the account and monitors account activity closely. Collections and branch staff share in the responsibility of monitoring activity and reporting suspected fraud or abuse. Monthly fee income and diligent account monitoring has allowed the program to break even. “So far, we feel it’s pretty revenue neutral,” Paulson said. “There are some charge-offs involved with the program, mainly just returned items from those members who simply can’t handle a checking account at all. We’ve had some increase in returned deposits, but not a large amount.” If a 2nd Chance Checking Account develops a negative balance, the member has 14 days to correct the problem, or the account is closed. Excessive negative activity results in the loss of ATM or Check Card privileges, or the account is closed. Additionally, the member’s ChexSystems record is monitored for fresh records from other institutions. If another institution reports the member, he or she has 10 days to pay any monies owed and present proof of payment. If the member fails to do so, the account is closed. “If there’s any abuse, we will close the account,” Paulson said, adding with a chuckle, “We don’t offer a 3rd chance program.” The program hasn’t required additional staff to monitor account activity, but the increase in members as a result of the program has brought enough business overall to hire new employees. Since adding the new checking account and a 2nd Chance Visa Card program to WestStar’s product and services mix, membership has skyrocketed from 400 to 700 gross new members per month, Paulson said. This helps offset a high number of account closures each month, due to the overall transient nature of the gaming industry. The 33,000-member WestStar gains an average of 200 net new members monthly, which represents an annualized membership gain of 7.3%. Participation in the program has been impressive. Nearly 3,000 WestStar members have a 2nd Chance Checking Account, representing about 9% of the total membership. In addition to the 2nd Chance Checking and Visa accounts, WestStar provides free classes to members regarding checking account and credit management. Since the inception of the 2nd Chance Checking program in 2001, approximately 400 members have completed the checking account course. “The class is not required, because it was just too cumbersome to require our members to attend, given their work schedules,” Paulson said. “But, we do have more success with members if they complete the class.” In fact, members who complete the class and maintain six months of satisfactory handling are eligible to upgrade to WestStar’s basic Star Checking Account, which does not charge a monthly fee. Of the 400 members who have completed the class, 56% have achieved the upgraded status. Garcia said he enjoys educating members about how to manage their finances. Most members don’t intentionally abuse account privileges, he said. Instead, they are simply uneducated regarding financial matters. “We have a very eclectic group of members, and they’re very good with their hands, they’re great performers, and overall are quite talented, but they just can’t handle their checking accounts,” Garcia said. “I love it when members have that `oh, I didn’t know that’ moment,” he explained. “The most frequent topic is how checks are processed. For example, they think that if they post-date a check, the institution isn’t allowed to process it before that date.” Other frequently misunderstood topics include the difference between using an ATM and a check card, and how holds can be placed on funds for certain transactions. WestStar does not currently offer Courtesy Pay or Payday Lending programs, but the institution doesn’t rule out adding such services in the future, Paulson said. The CEO said he prefers Payday Lending to Courtesy Pay, due to the proactive nature of the service. “The key is that the member has to proactively manage their account, so they are the one responsible for their finances, not the credit union. If we do everything for them, they won’t develop the permanent responsibility,” he said. -