One of Virginia’s largestcredit unions has received a boost lately thanks to state employees who must join its ranks under a new state loan program.
Operating the Virginia State Employee Loan Program, the Virginia Credit Union has seen an uptick in membership partially because state workers must join the group to access the short-term aid. The initiative, touted as an alternative to traditional payday lenders, has provided more than $1.3 million in loans to nearly 2,800 state employees — at a 25 percent interest rate. Virginia Credit Union officials say the programis a way to meet the financial demands of state employees, not pad membership.
When asked if the program stimulated the credit union, spokesman Glenn Birch said, “Absolutely not,” adding, “The program is not a moneymaker at all.”
Birch said most people who received the loans were already part of the credit union and that the program accounted for 6 percent of new members last year.
The group’s membership is about 190,000, and growing, Birch said, part of an industrywide trend. As banks have become more restrictive with lending, more are turning to credit unions — and their lower interest rates — for help.
But that’s not necessarily a positive development.
“Personal credit unions are only as strong as their depositors,” said Gerald Hanweck, a finance professor at George Mason University. “There’s a lot of weakness there, making loans to members who are having employment issues. They’re really just trying to stay the course.”
Credit unions’ troubles have been less publicized than banks’, but Hanweck said they are encountering many of the same problems — somewhat masked by recent mergers.
Virginia has 192 credit unions, according to the Credit Union National Association — four less than the previous year.
The Virginia Credit Union takes $5 out of a member’s initial deposit to cover membership costs, Birch said. According to the Virginia Credit Union League, the credit union maintains nearly $1.7 billion in assets.
