Credit unions are performing masterfully in supporting their members through the COVID-19 crisis. Many are providing members with much-needed relief in various forms, including payment deferral programs, fee waivers, additional credit access on favorable terms, and workout arrangements and hardship programs. They are using this time to build stronger member relationships and retrain or redeploy their employees to support new ways of doing business. Empathy and adaptability characterize their response to these extremely challenging circumstances.
Adapting to Challenging Times
We cannot ignore the unprecedented job losses experienced amid the COVID-19 outbreak. Over 35 million jobless claims have been filed, and the unemployment percentage rate currently stands in the mid-teens. Many of these jobs will be slow to come back or not come back at all. Unfortunately, there is no way around the fact that a wave of credit losses is building. No amount of accommodation or forbearance can avoid that reality, and it is not sustainable.
Anecdotally and through earnings releases, we are hearing that large bank credit card issuers are beginning to tighten credit. They are reigning in account acquisition efforts and reportedly reducing credit lines for some borrowers, while adding to their loss reserves in anticipation of higher charge-offs.
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