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Credit Unions

How PenFed Kept Financial Doors Open During Government Shutdowns

During the 35-day U.S. government shutdown, federal credit unions had thousands of members without paychecks, with no end in sight. Ricardo Chamorro, EVP at D.C. area-based PenFed Credit Union, tells PYMNTS that keeping its affected members afloat meant applying lessons learned from weathering more than 20 shutdowns to provide stability to its members.

The longest government shutdown in U.S. history ended Jan. 25, lasting 35 days and resulting in approximately 800,000 federal employees being furloughed or working without compensation. While the shutdown is long over, hundreds of thousands of federal workers who endured more than a month of financial uncertainty are still feeling its effects.

Several credit unions have rolled out services specifically geared toward helping affected federal workers, however. These CUs — including Navy Federal, which is the nation’s largest — provided furloughed government employees with services like zero percent interest rates on credit lines of up to $6,000. Launch Federal Credit Union offered federal workers a zero percent interest rate on loans of up to $3,000, while the U.S. Employees Credit Union provided impacted members interest-free loans for 60 days, regardless of their credit scores.

Pentagon Federal Credit Union (PenFed), one of the largest CUs in the U.S., offered similar solutions. Its executive vice president of corporate and business development, Ricardo Chamorro, recently spoke with PYMNTS about how the FI helped members affected by the shutdown — and how it benefited from a strong communication strategy.

Keeping Financial Doors Open

Several thousand federal employee PenFed members felt the shutdown’s effects, Chamorro said. While the news was somewhat unexpected, the CU was prepared because it had previously endured more than 20 government shutdowns that left workers furloughed.

“We’ve had the benefit of preparation, so that instances like this don’t catch us by surprise,” he explained.

During the shutdown, PenFed offered several solutions to ease the uncertainties faced by furloughed members. One such option allowed them to skip a payment on an existing loan. Another gave them the ability to take out zero percent annual percentage rate (APR) advances on overdraft credit lines for amounts equal to their most recent direct deposits from qualified government agencies or up to $6,000, whichever was lower. Members using the direct deposit assistance program were required to pay off their loans within their first pay periods after the shutdown ended.

Chamorro said PenFed also provided solutions for non-members as well as existing ones, offering both groups a 2 percent APR discount on new loans.

Keeping Communication Lines Open

As the shutdown unfolded without a clear end in sight, many federal workers faced uncertainties surrounding their government employment status or when they would receive their next paychecks.

Chamorro noted that CUs are in a unique position to alleviate financial anxieties for existing and potential members facing these difficult situations. That’s why clear and effective communication efforts explaining available financial services can be as valuable as the services themselves.

“One of the most important lessons I’ve learned in more than one instance is that communication is key [for] all financial institutions that have members or customers impacted by the furlough,” he said. “That is the primary tool available to them, the main arrow in their quiver.”

PenFed’s communication efforts included reaching members through email, digital and mobile channels to discuss how the CU’s services could address their needs. Its call center staff members were also part of its push, ready on the front lines to address members’ concerns and educate them on available assistance.

Chamorro urged other CUs to come up with strong communication strategies to help members understand that they have financial partners available in the event of another shutdown.

“The sooner CUs can reach out to members and communicate the options available to service them, the better,” he said.

It’s unclear when the next shutdown could occur, but CUs can help both existing and potential members understand the financial resources into which they can tap during financially unsettled times. Communication is key to assuring federal workers that they will be able to tread through uncertain financial waters.

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The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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