The auto and health care worker strikes are poised to have a major financial impact on thousands of families located in multiple states across the US. Much will depend on the magnitude and duration of the strikes. With pandemic savings running low and higher heating costs projected, affected workers are expected to struggle to make ends meet. It's pivotal for credit union lending teams to prepare for multiple outcomes during this volatile period including higher delinquency.
“(UAW) striking workers won't be getting paychecks while they're out of work. They will receive $500 a week in strike pay from the union. But on average, that will replace only about 40% of their lost wages. That will likely mean reduced spending in communities where striking workers live.”
NPR 9/16/23
Financial institutions frequently wait for borrowers to request relief instead of proactively offering it. Because of this, borrowers may not know hardship assistance is available. Other borrowers, feeling self-conscious about their financial struggles, may delay seeking help. By the time they do, their delinquency may be too advanced to remediate
Today, credit unions provide hardship support during major weather events or payment skips during the holidays. They could similarly offer proactive relief only for workers affected by the strike and/or for market-driven events mentioned earlier. Credit union executives should consider preemptively offering payment skips now or at the beginning of home heating season. However, many borrowers will require longer-term solutions.
If your credit union policies allow for it, proactively extending auto and personal loan terms could help those affected by the strike. Adding 12-18 months could reduce monthly payments by $100-$150.
Term extensions are not without risks. For auto loans, it may affect future trade-ins or sales and impact gap waiver payouts in the case of total loss. Credit unions must thoroughly assess and disclose these risks during the modification process.
89% of Americans use online banking so offering relief programs there is logical. Implementing a special hardship assistance program is only helpful if members know about it. Statement messages, emails, website banners, and pre-recorded hold messages all work, but given the clutter in these channels, utilizing the online banking channel to notify members that they qualify for assistance is more powerful.
It’s quite easy for a credit union to identify who is eligible for their relief programs, reach only those members who qualify in online banking and through email/SMS campaigns, and invite them to self-serve - with an add-on to your current online banking platform. This approach offers members privacy and simplicity for managing sensitive financial matters, while also reducing the manual support typically needed from credit unions during calls or branch visits.
Credit unions should standardize assistance programs to prevent errors or backlog. Tips for standardization include:
Even with assistance programs in place, credit unions may not be able to avoid increased delinquencies due to the strike and other market impacts, but preparing now will give members their best shot at managing increased debt payments this fall and winter.
Constant, a CUNA Strategic Services alliance partner, is the only software provider that fully automates loan servicing so members can resolve issues entirely in their online banking account - and then leverages insights from those actions to make relevant product offers to the member. With Constant, credit unions can reduce operating costs, empower members to self-serve, and leverage member self-service actions to deliver tailored product offerings.