Dear Members — I have reactivated my blog to engage in an open conversation with you to provide information, answer your questions, and keep you up to speed on Credit Union activities and plans. It is no secret that the Fire Service is being financially impacted more so now than at any time since the Depression of the 1930′s. Members are struggling financially and looking for assistance and answers. Let’s take some time in this blog, to communicate and move to positive outcomes.
During these economic challenges a refocus on the roots of the credit union movement may be in order. “Not for Profit – Not for Charity – But for Service” has been the credit union industry motto for over 100 years, and LAFCU’s philosophy for over 75 years. A credit union is a cooperative financial institution that is owned by its members and operated for the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members.
The most important difference between Banks and Credit Unions might be this: Banks are for profit and credit unions are not. Though credit unions have existed in America for over 100 years – and nearly 100 million Americans already belong to a credit union – many still don’t think of credit unions as being free from profit motives. Credit Unions function like banks in that they take deposits and make loans and provide a wealth of financial services, but exist solely to serve their members, never for profit.
Here are a few additional ways that credit unions and Los Angeles Firemen’s Credit Union are unique:
- Every credit union member owns a share of the credit union, and each member has the ability to elect a Board of Director’s who represent their needs and interests in the Board room on a 1 vote per member basis irrespective of the amount of money individual members have in the credit union.
- Credit unions do not look to make profit for shareholders. Instead of turning profits, credit unions return the money they make to their member shareholders in the form of higher rates on savings, lower rates on loans, reduced fees, as well as new and improved services such as FIREHOUSE Financial, FIREHOUSE Business Services and most recently Firefighter Insurance services.
- Credit union strategic direction and operations are overseen by a non-paid volunteer Board of Directors whose role is to represent member interests. They are motivated by service to their fellow firefighters, not by compensation.
- Credit unions are cooperatives, meaning they work with – not in competition with – each other. What’s the benefit? One example is CO-OP Network, which offers credit union members access to more than 28,000 surcharge-free ATMs nationwide.
- Credit Unions ultimate success is determined by how well each member serves their fellow members. For example LAFCU relies on members who are savers to fund loans to those members who are borrowers. The amount and degree of loan delinquency and charge offs by some members determine the end of year ability to share refunds and bonus dividends with the entire membership in addition to the ultimate financial stability of the credit union.
- Concern for community (California’s firefighter community in our case) is a credit union value, whether through services to people of modest means or the creation of foundations (Fire Family Foundation, for example) that helps our fire families in time of need.
- Credit unions invest in their members by providing educational opportunities and financial education for members and youth.
The margins we are able to earn from interest on loans less dividends paid on member shares cover the operating expenses to run the organization and allow for improved and new services to get introduced. The remainder of the funds (after interest refunds and bonus dividends in those years we pay them) goes into our capital bucket which is set aside for when bad things happen (such as the economic conditions we are faced with today). Today those reserves stand at a very healthy $80 million.
So you may ask why I just gave you a history lesson on credit unions. This model is our model at L.A. Firemen’s Credit Union and as such it is important to note that we are very different from other financial institutions, including banks. I am hopeful that understanding this fundamental difference will provide good context to my ongoing comments in this blog and will be helpful to you “our members” as we continue our discussions.
And, it goes without saying that the LAFCU Credit Union Model is built on Integrity, Trust and Doing the Right Thing for the membership of this Credit Union.
Due to the job stability of municipally and state paid firefighters, we have been able to enjoy almost non-existent loan losses over these many years. State budgets were never impacted to the point they are today. Now fire departments that are challenged with city budgets must revisit their budgets frequently because cuts in overtime and other benefits are common. We are fortunate that job losses are few and far between for fire service personnel; but, firefighters are faced with the challenges of reduced income as well as pay cuts and/or layoffs for many working spouses. This impacts our membership and the Credit Union causing higher delinquencies and charge offs today. This in turn affects LAFCU’s ability to give back to the members in the form of interest refunds and bonus dividends.
The Credit Union is weathering this storm well but not without some impacts. Delinquencies and Charge Offs have increased and that contributed to the Credit Union’s net loss in 2009. That being said, our financial position and strength is considerable and our capital ratio approximates 9% whereby 6 % is noted by credit union regulators as being adequately capitalized and 7% as well capitalized.
We are working with members in financial distress and continue to provide loan extensions, loan modifications, and consolidations, along with a free in house and an outsourced budget counseling service called Balance. We also have many resources on our website from calculators to articles to financial coaching videos that can help improve a family’s cash flow. Although the Credit Union is here to assist our members in every way possible, we have found ourselves not being able to help every member. Sometimes the wound is too big and a band aid will not help in the long run.
During these tough economic times, the Board of Directors and Management will continue to take a leadership role and make difficult decisions (such as not paying an interest refund and bonus dividend in 2009) to ensure the financial security of the “membership at large” as well as to ensure the safety and security of this organization that was built by firefighters for firefighters.
Please provide me your comments and thoughts along with any questions I can answer. Thank you all for your loyalty and for participating in this exclusive firefighter community – our families benefit – our fire departments benefit – and the fire family community benefits.
Mike
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I be interested in seeing the categories where losses occured in 2009 that contributed to the net loss.
Hi Levonne, thank you for the question. The breakdown for the charge offs we incurred were as follows: 24% Visa, 17% Line of Credit, 16% Auto, 13% Signature Loans, 12% HELOCs, 11% Mortgages, and the remainder were other types of consumer loans. Total charge offs for 2009 were $3.2 million; however, based on Accounting rules we also had to recognize additional “loan loss” dollars in our financials for other potential charge offs that we could be facing in the future. Those additional “loan loss dollars” also contributed to the overall loss in 2009.
Unfortunately, we also had to write down our capital position held at Wescorp (a corporate credit union) which totaled about $4.9 million in addition to an assessment from our private share insurer of $1.2 million. As an added point of interest, Federal credit unions were assessed even higher percentages and have also been informed that there will be additional assessments in 2010. Hope this information helps.
Again, I want to re-iterate that the Credit Union is safe and strong with almost a 9% capital ratio and each member’s account is insured for up to $500,000 per account type. Thanks again for the question.
I would like to share my financial hardships to clarify or better understand the lafirecu practices. While all was good, so was the service at Lafirecu.When things took a down turn, so did the service or motivation to HELP. On Friday 5/14/10 i called to inquire about a small($4)charge noted on my account.”24 days del” I new I had paid everything on time.Looked and found I had.The error was/is the computer program. I did pay/transfer 2 days late,the amount displayed on my screen but the program has already moved on to the next months amount. Which in this case was $4 less.No notice,no permission to access my account to make such deduction! Interesting,anything I want to change or do has to be preceeded by a written and faxed letter.So the service dept person on the phone could not help/explain why. The collections dept could not explain/help,so here i am. There has been too many recent similar issues.I called for help with a loan to find some relief from high credit card interest rates.DENIED.I called to refinance a RV loan to find relief from a higher rate.DENIED(is repo prefered by LAfirecu?). I was purchasing a truck from a fellow firefighter who was also in hardship,rather than work it out LAfirecu chose to repo it??I had already started to pay the truck off for him?SOD is almost gone.Something we should not live by but it is what it is and the credit union is letting a lot of our FAMILY members down.Remember,by firemen for firemen!Increased privlage pay fee? Online account balances posted having ghost charges that are deducted the same morning of ones payday deposit but prior thus reflecting/generating a insufficiant funds fee.(but the deposit is always there )Checks are soon a thing of the past. Many of us use the Atm/Visa card for everything,the program should be brought up to date.We should not have to keep a separate registry to track its use.(which I was told to do by a service rep when I inquired in the past on fees)That should be part of our online banking.Paperless,convenience..The majority of my co workers are displeased with the practices/service of LAfirecu.What are we left to do? Dump the Lafirecu and move elsewhere? By firemen for firemen remember.There are too many loosing too much. Help is desparately needed.In my family we would not let ANY family member sink.
Alberto,
Although I cannot comment in this blog on your personal financial situation due to privacy issues, I can address your question in a general manner.
If members apply for a loan to payoff other high rate outside credit cards, we must verify that a member is properly qualified to repay the loan. We look at total debit to income as well as the member’s credit rating. We attempt to help as many members as possible but must also be careful to not add unacceptable levels of additional risk to our loan portfolio by bringing into the credit union “outside debt” that may result in potential charge offs which would negatively affect all members. We also make sure that the new loan fits the member’s payment capacity and financial situation. Please know that the credit union also offers loan modifications and extension agreements when the circumstances warrant it .
We also address member’s RV and auto refinance requests to assist “members in trouble” even if the vehicle is upside down if that refi helps the members cash flow and if the member’s debt to income ratio and credit rating indicate an ability and willingness to repay the loan.
Your question re: fees appears to be making an assumption that we are following the “bank practice” of passing debits before credits when positing checking transactions in order to increase revenues. This of course is not our practice. “Posting dates” and “transaction dates” are not controlled by the Credit Union when it comes to debit card transactions. These transactions flow through the merchant and through Visa and are received by the Credit Union and posted. The Credit Union posts credits before debits on a daily basis but does not control timing of transactions in order to generate income. The practice of posting “debits before credits” is common amongst banks to increase revenue, but is not practiced at LAFCU.
In regards to your $4.00 payment issue, due to concerns for privacy, I would ask that you contact Lynn Seeber at 1-800-231-1626 x 2293 for a thorough explanation.
Many members track their ATM or VISA charges in their “paper register” or through programs such as quicken but you also can see the posting of those transactions in a number of ways including Home Banking. Good news-Mobile Banking is coming soon and you will be able to view these transactions from your web-enabled cell phone. The other piece of good news is that an enhancement to our Bill Pay module late this year or early next year will include an online Quicken-like “Budgeting and Expense tracking” module that will allow you to see and track ATM and VISA transactions very easily.
Hope I have answered your questions and statements. Thanks so much for your questions.
Dear Mike,
I just want to let you and others know that I have not had any problems with our credit union for the past 20 years. In spite of this economic crisis, I have full confidence in the people who run our credit union. Part of your responsibility is to see to it that our meager deposits remain safe. I understand that the credit union sometimes have to deny loan applications that it believes repayments are questionable. I applaud you for this. People should be responsible enough to live within their means. I am a widow, live in a seniors’ mobile home park, don’t have an RV, but happy and content. Keep up the good work.
Annabella Nice
Annabella, thank you for your years of loyalty to the Credit Union.
We want to ensure that our members funds are safe and secure and at the same time help our Fire Family achieve their financial goals. We realize that California firefighters and their families are under severe economic distress. LAFCU truly wishes to find that fine line between meeting their financial needs while insuring the safety and soundness of your Credit Union. Thank you again for your support.
Mike, first of all, let me thank you and your entire staff for the GREAt job they do for all of us on a daily basis! If it’s possible, could you bring back the button on the website that will allow members to make additional payments to principal only on our home loans. I’m trying to pay off my loan before I retire and it requires additional payments to principal every month. the old website had a button on the transfer page for principal only but the new one does not. I have to call the Credit Union each month to do this extra payment. This is not a problem, but when I ask that the extra money go to principal, it was done incorrectly 3 out of 4 months, requiring your staff to go in and un-do the incorrect entry, and re-enter it as principal only. it would make life easier for everyone to just put the “principal only” tab back into the website where you can transfer funds. make it easy for us to give you more money! Thank you again for everything you all do for each of us to help us and our families!
Most sincerely,
Chris
Chris,
Thanks so much for your kind and positive words of encouragement as well as your loyalty to Los Angeles Firemen’s Credit Union and its membership. I am very pleased that my staff is very focused and committed in serving the needs of our Fire Family and it is great to hear when the members see and feel it.
To your question: The option of making principal only payments was available in the past and has been recently removed when we upgraded our FIRE OnLine Home Banking System. The new system does not yet have the ability to apply principal only payments to loans in conjunction with our current data processing system. As you may have heard, we are working hard to replace our data processing system later this year, this option should be available once again after that project is completed. The issue of our call center staff not processing your principal payments is concerning and is being addressed immediately. We apologize and I want to insure you that we are taking steps to train our staff in this area.
Thanks again,
Mike
Thank you Mike, and thanks again to your staff who does a great job! I couldn’t be more pleased with their performance and upbeat attitude and willingness to help. Also, a BIG thanks to the Board members who serve us year after year with little or no compensation. We have all that we have due in large part to their generosity of spirit and the large commitment of their time month after month, year after year, all in the name of the brotherhood of the fire service. Your tremendous volunteer expenditure of your own personal time for our benefit does not go unnoticed or unappreciated.
Most sincerely,
Chris