By Ray Birch
MONTPELIER, Vt.—The seriousness of the situation facing consumers from the coronavirus pandemic can be seen in the rate and term of Vermont State Employees Credit Union’s Emergency Loan—0% for 24 months.
The credit union has traditionally rolled out offers of assistance every time there’s a need, whether that be a natural disaster, a government shutdown, or most recently, a countrywide economic closure. But its latest offer is a first.
When the government shut down last year, the $843-million VSECU offered 5% Emergency Loans for three months, explained Valerie Beaudin, head of consumer and residential lending. “That was a difficult time for many of our 70,000 members,” Beaudin recalled. “But what many of our members are facing now is considerably worse, we believe. We’ve never offered a rate and term like this.”
The local economy is no different than the average town, said Beaudin—no large concentrations of industries impacted dramatically by the pandemic, such as entertainment and hotels.
“Everyone is hit hard by this,” said Beaudin. “This is going to have a severe impact locally.”
Indeed, there was a “rush” for the loans when it was introduced March 16.
“We’ve made 183 loans so far,” said Beaudin, referring to the first 10 days of activity. “Many of those loans were made in the first few days. We have granted $346,600 in Emergency Loans so far—that’s a lot of small-dollar loans. The limit is $2,000, but some people are not asking for the full amount.”
‘Second Wave’ Anticipated
VSECU has not added staff to handle the loan demand, but it is preparing for a “second wave” of people coming in for the assistance.
“We are ready for that,” she said. “The demand has been more manageable since it has tapered off after the first three or four days. However, people had just received their last paycheck when we first offered the loan. Now that they can’t go to work I think we will see a spike once payday Friday rolls around and there is nothing there. Unemployment benefits do not replace a paycheck.”
VSECU also anticipates it could see a greater demand in the coming weeks as more people in the community learn about the loan. The credit union is offering the assistance to anyone who stops in and joins.
Taking on that kind of support now, acknowledged Beaudin, is a big move by the credit union, at a time when every CU’s net income is under stress. As a number of CEOs have told CUToday.info, credit unions are now being challenged to allocate resources to members who need it most, as credit unions do not have “limitless resources” during these very difficult economic times.
Valerie Beaudin
“But we want to do this for our community, because that is what credit unions do, and we will do this for as long as is necessary,” she said.
Local Partnership
Beaudin said VSECU is able to extend the loan to those outside its existing members due in part to partnerships with two local nonprofit organizations.
“We have partnered with the Vermont Community Foundation as well as Let’s Grow Kids,” she explained. “They are providing some financial backing, which has bought down the rate to 0%. They are also assuming some of the risk of the Emergency Loans we are making during the pandemic.”
VSECU is also working closely with its members to modify existing loans and accommodate late payments.
“Again, this situation is very different from the last time we offered the Emergency Loan,” said Beaudin. “That was during a government shutdown, and the employees who were out of work were gainfully employed. They had jobs to go to when the shutdown was over, and they received back pay. This loan is a great product we can turn on and off quickly, and it’s really needed right now.”