ALEXANDRIA, Va.—Credit unions serving the military report strong membership growth and that programs to help servicemembers battle payday lenders—and often their own poor financial habits—are having good results.
With Veterans Day this week, CUToday.info spoke with the $19.2-billion Pentagon FCU here and $1.2-billion Pen Air FCU in Pensacola, Fla., to discuss key issues affecting the credit unions and their members.
Both PenFed and Pen Air reported that membership growth has been excellent in recent years.
“We are growing at nearly a double-digit pace,” said PenFed President and CEO James Schenck. “We will gain more than 100,000 net new members this year. That’s a big increase over 2014, when we added 35,000 net new members.”
Schenck said PenFed is experiencing a great deal of growth among Hispanics in the military, and from women among its SEG base, with these members primarily looking for car loans, mortgages and credit cards.
50-50 Split
Schenck pointed out that the record growth is split 50-50 from inside the active military and those outside the armed forces. He attributes the growth largely to PenFed’s loan and deposit rates, which Schenck said stand about 50 basis points better that most competitors. In addition to its rates, Schenck said that products tailored to the military—such as its “Defender” Visa card—are attracting new members.
James Schenck, PenFed
Pen Air Federal Credit Union, as well, said it is seeing solid member growth from inside and outside the military, experiencing growth well above the industry’s average.
“We have been very strategic in our approach to growth over the last two years, leading the credit union to more than 5% member growth,” said Patricia Veal, director of public relations.
Veal said that while Pen Air does not track whether a member leaving the CU is military or not, she said the Pen Air’s overall member retention rate is very good.
“Pen Air does not have any trouble with retention in general because of our strong member relationships,” said Veal. “If a member chooses to relocate, Pen Air offers continued services through our shared branching network, online banking, mobile banking, telephone banking, and many other free electronic services. These services provide worldwide reach to members wherever they may live or travel. Pen Air’s mission is ‘Enhancing Lives Through Exceptional Service, Strength, and Financial Solutions.’ It’s living this mission that retains our members.”
Members Sticking Around
Schenck said with the credit union’s heavy emphasis on e-services, and with its market-leading rates, member retention among the military and its SEG groups is excellent.
“Once a member always a member here at PenFed,” said Schenck. “We have one of the highest retention rates in the industry.”
A critical issue for many military credit unions is that young enlistees are often naive about finances and not making much money, and many need counseling to avoid financial trouble if they don’t get into trouble first. Veal reminded that the Department of Defense requires troops to receive a certain number of financial literacy hours in their basic training, but said the credit union is ready afterward.
“Pen Air works closely with our military base’s Fleet & Family Support office to offer workshops on a variety of financial literacy topics such as wealth management, credit, first-time home buying, auto buying, and others,” explained Veal. “Pen Air also partners with our bases’ Military Saves Week each year and offers financial counseling resources when necessary. Pen Air offers financial literacy videos and resources on our web site for all members, and we partner with Balance to offer free financial counseling and an opportunity to re-establish credit for future borrowing needs.”
Patty Veal, Pen Air
Schenck said PenFed dedicates a great deal of time and money to delivering financial education to military members and their families.
“Within the last 24 months, PenFed has provided more than $4 million of hard dollars from our PenFed Foundation in support of veteran and other military causes,” said Schenck. “That is just hard dollars. We do another few million dollars in-kind each year to support veteran and military causes.”
Fin Ed A Requirement
Schenck said a major focus of the PenFed Foundation’s support is financial literacy.
“We offer the Dream Makers program for the military,” explained Schenck. “The program provides a three-to-one matching grant up to $5,000 for first-time homebuyers. But before they can get the grant money, they have to complete a financial literacy course.”
The credit union takes the same approach with its Asset Recovery Kit, PenFed’s program to battle payday lenders that have been lining up outside military bases in growing numbers. Schenck pointed out that payday storefronts in the U.S. have increased from 2,000 in 1996 to more than 40,000 today. He said payday lending is PenFed’s biggest member concern.
The Asset Recovery Kit provides a servicemember with a $500 interest-free loan to break the payday loan cycle.
“In the last few years we have provided 15,000 interest-free loans that are coupled to financial counseling,” said Schenck. “Before a young servicemember receives the loan, they have to complete a financial counseling program. We want to give members the tools to be successful financially going forward.”
Acknowledging it is difficult to track the how well members stay on a sound financial course, Schenck said PenFed hears directly from thousands of members each year—via testimonials and interactions with front-line staff—about how the credit union has helped them gain firm financial footing.
“We are very proud of our outreach to the communities we serve and to the young servicemembers through this program,” said Schenck.
Big, But Small
Veal credited strides made against payday lending by the Military Lending Act, which limits payday lending interest rates and provides for other restrictions that prohibit the creditor from assessing a penalty if the borrower prepays the credit.
“Pen Air also has a program in place called a Short Term Small (STS) Loan program that can be used to pay off a payday lender and get under a more manageable, credit building program,” she said. “The STS offers a loan from $200 to $1,000 for a term of one to six months up to 18% APR max. The program is designed to help the member pay off the payday loan and offer assistance when only a small-dollar loan is needed.”
While growth is good for credit unions, Schenck said PenFed will never lose touch with the needs of its individual members.
“Yes, we are big, but we are small at the same time,” said Schenck, noting that issues members face daily are brought to the attention of the board and to Schenck.
“My chairman sees all of member complaints, and he gets them directly when they come through our website, and then they come to me,” said Schenck. “We still treat members one-to-one, and with a high level of service. And that is the way it has to be. In this technologically advanced world, it is no longer one-to-many in marketing, it is one-to-one. And PenFed has made a huge investment in people and technology to provide this kind of member experience.”