The help members need: Standing in the gap

If you are wondering what your members may need right now, I would suggest they need understanding and creative solutions. Recently, I have had conversations with two people who called BALANCE wanting financial counseling. They both had a gap that needed covering. Their emotions around money were high.

The first story is about a single father raising his son. He has his savings and checking accounts with a credit union. He also has a credit card, car loan, and mortgage with the credit union. During the pandemic he lost his job for two months. He is working again now and is caught up with everything except his home. He is three months behind and the total dollar amount due is $3,000. He has enough money to pay all his monthly bills with a small surplus, but he just cannot catch up on the amount that is behind. Losing his home is a reality. He was feeling scared, anxious, frustrated, and ashamed. He asked the credit union if they could re-write the mortgage and add the three months ($3,000) to end of the loan. They said because he missed three payments his credit score did not support a mortgage re-finance right now. They encouraged him to apply for a $3,000 signature loan to pay up the late mortgage. He felt he could pay pack that loan over three years on his current salary. I am encouraged that the credit union is helping him keep his home. This man had a $3,000 gap.

The second story is about a single guy who has savings, checking, and a credit card with a credit union but for whatever reason, his car was financed with a local finance agency. He lost his job for three months during the pandemic. He missed car payments. He did not reach out to the credit union (or anyone) for help. He is now employed again and can make payments as he did prior to losing his job but it is too late. The car has been repossessed by the Finance Agency. Now he can no longer get to work to earn a living. He will soon default on credit cards if he cannot get his car back. I wished he had reached out to the credit union earlier. Maybe they could have refinanced the car to help him stay in the vehicle? Maybe they could have given him a loan for the $900 (three missed payments) to help him catch-up on the car loan. But he did not reach out – he just shut down because that is how shame impacts us. He had lost hope. He was frustrated with life and money. He decided he is going to take a 401K distribution (taxed) to help himself get caught up. It will take a few weeks to process so they may not hold his car, but he has explained the plan to the finance agency. I hope it works out for him. This man had a $900 gap.

In both stories the members needed coverage in a gap. They both had figured out new employment quickly after the pandemic took their job. But they, like most Americans, had no safety net and fell behind. However, they are working and earning now, they just have this gap they cannot close. In both cases, the amount needed to get caught up was relatively low ($3,000 and $900). $3,000 to keep a family in their home. $900 to get a car back to be able to continue employment. These real stories reminded me of the case studies the students worked on at the Cornerstone Foundation’s Principles and Philosophy workshop in October. The students discuss the business side and the social side of credit unions and they explore what makes a credit union different. They learn all about the 12 “development issues” which include transportation, employment, savings, and housing all mentioned in the two stories above. These development issues are defined below. 

• Housing – Humans have a basic need for shelter. Inadequate or unstable living conditions can have significant impact on people’s ability to overcome many other development issues. 
• Transportation – Simply put, transportation provides access. Without transportation, individuals may not be able to maintain employment and families may not be able to access schools and food. 
• Employment – The ability to produce and generate income provides individuals with a path to contribute to the greater economy and marketplace. 
• Savings – People cannot rely on credit alone to solve all issues. A habit of saving will provide financial security and peace of mind when it comes to emergency expenses. Longer term savings help people build wealth and plan for retirement. 

How can credit unions, as financial cooperatives, take steps to improve the communities we serve by focusing on development issues? The current environment provides so many opportunities. Credit unions have a rich heritage of being there for their members after a tornado, hurricane, fire, or government shut down. We meet the member where they are and do our best to meet their financial needs. This pandemic has caused financial stress that spans more than 18 months. Our members are getting back on their feet, but they have a gap … and it could be that $900 could change their whole situation. Credit unions should continue that heritage of “people helping people” in this historical time of need. Members will always remember who was there for them during a crisis. Standing in the gap is the way to earn their loyalty! Maybe we call it a “Standing in the Gap” loan with special terms? Maybe it is looking at their entire financial situation and restructuring all their debt? Maybe it is helping them design a new household budget using the new income. Maybe it is looking at the credit report together and designing an improvement plan? Maybe it is working on a debt repayment plan? Whatever the solution, it will require TALKING about money. It will require us to take the shame out of money. 

How can we help members find their way back to financial health after the financial stress the pandemic caused? Meet them where they are at without judgment. Seek to understand and be creative with solutions.