Since March, when the U.S. government's across-the-board budgetcuts began taking effect, credit unions in communities filled withfederal employees have stepped up to help members cope with theconsequences of sequestration, especially income loss.

Department of Defense downsizingand other federal payroll cuts are creating financial hardship formany credit union members, especially military families, accordingto a recent survey by First Command Financial Services Inc. in Fort Worth,Texas.

“The uncertainty surrounding sequestration and militaryretirement benefits is fueling concerns in many military families,”said Scott Spiker, CEO of First Command Financial Services.

Credit unions are well positioned to help minimize the impact ofsequestration, industry leaders agreed.

In the past few months, credit unions across the country,especially ones with close military connections, have responded tosequestration in such ways as launching awareness campaigns,hosting educational workshops, rolling out emergency loan products,offering new saving options and slashing fees for members facingfurlough or unemployment.

Here are three examples of how the credit union industry hasresponded to sequestration:

• The $188 million Northern CU in Watertown, N.Y., began offeringassistance such as 60-day, no-interest loans to help membersemployed at Fort Drum facing an 11-week furlough that began July 8.
• The $405 million CBC FCU in Oxnard, Calif., is providing a lineof credit (up to two months of applicants' net pay withinterest-free financing through 2014) for about 5,000 memberswho work at a local Navy base.
• The $1.7 billion Robins FCU in Robins, Ga., is offering memberswho work at the Robins Air Force Base special furlough loans,refinancing car loans, home mortgage-loan assistance, askip-a-payment option and extending terms of current loans.

Here's a closer look at five ways that credit unions areassisting members during the current sequestration.

Next Page: On the Phone or inPerson

1. PhoneHotlines, Prompt Action and Personal Service

Sequestration hotlines began popping up this spring at creditunions across the country, including the $54 billion Navy Federal Credit Union.

“As their dedicated bankingpartner, we've been providing phone and in-person assistance tohelp them overcome any financial difficulties,” said ClaudiaWarszawski, a personal finance manager at the Vienna, Va.-basedcredit union, the world's largest. “We're doing what we can toprovide assistance, and encourage all current and potential membersto contact us to review their options and seek relief.”

In addition to setting up a phone hotline, Navy Federal launchedother initiatives to help members cope. For example, the creditunion said, members can access military pay direct deposit onebusiness day after sequestration assistance is approved.

As another effort to provide helpful information as quickly aspossible, Navy Federal is offering members advice on copingwith sequestration such as:

• Set a budget and cut unnecessary expenses
• Adjust means of transportation
• Make it a family goal
• Talk to creditors

Some credit unions are receiving extra recognition for theirsequestration assistance programs. Adding a phone hotline and otherefforts at the $353 million Air Force Federal Credit Union helped the 37,000-member organization earnthe highest rankings among military Fis in a survey byGoBankingRates.com.

Next Page: Let's Sit Down

2.Workshops and Financial Counseling

Financial coaching and educational workshops related tosequestration are being implemented at many credit unions,including the 26,000-member Belvoir Federal Credit Union in Woodbridge, Va.

In the past few months, more than 50 Belvoir Federal membersattended free seminars topics such as “Taking Charge in ToughTimes” and “It's a Matter of Life and Debit” in recent months, thecredit union said.

In addition, the $310 million credit union, which has served theFort Belvoir and U.S. Armed Forces community since 1946, isoffering other assistance for members facing furloughs, such asemergency loans. For example, qualified members with existingdirect deposit can borrow up to $5,000 at a fixed rate of 4.99% APR(0% APR for the first 60 days with a maximum term of 12 months) andmay defer their 1st payment for 60 days, the credit union said.

Since March, Belvoir Federal reports that it has aided 20members with individual financial coaching, four members withemergency loans, seven members with loan workout options and sixmembers with skip-a-pay.

The $2.6 billion Wright-PattCredit Union, which is the official on-base credit union forWright-Patterson Air Force Base in Dayton, Ohio, collaborated withU.S. Air Force officials, the Dayton Development Coalition andMontgomery County's Workforce Development Division to provideassistance to those affected by defense cuts. For example, thegroups hosted an information fair on the base and a communityresource fair at a local university, according to WPCU'swebsite.

At the $304 million CommonWealth One, a hotline has beenestablished and members can tap into a free, online debt analysistool, Debt In Focus, which provides a personalized financialassessment and creates a monthly budget.

“We're here to help our members through the challenges of facinga reduced income,” said Ashley Baldeon, marketing manager for the36,000-member organization in Alexandria, Va. “We thoroughlysupport 'people helping people.'“

Baldeon said the first step in the process is for members tounderstand their financial situation before they can factor in theimpact of sequestration on their income.

Next Page: A Lending Hand

3.Emergency Loans, Loan Assistance and Skip-a-Pay

Offering emergency loans, loanworkout options and skip-a-payment programs are effective ways forcredit unions to provide a financial parachute for members tryingto stay afloat during hard times, according to credit unionleaders.

The $16 billion, 1.2 million-member Pentagon Federal Credit Union in Alexandria, Va., is promoting thefollowing services for furloughed employees:

• Members may skip a payment for all loans except real estateloans.
• Members can request a one-month due date bump during each monththe furlough continues. with interest continuing to accrue on theloan.
• Debt consolidation loans.
• “Furlough Loans” of up to one month's net pay for a maximumterm of 12 months at 7.99% APR.

Other credit unions are also tailoring loan products. The $1billion, 78,000-member North Island Credit Union in San Diego is offering a special 3% APR signature loan with nocollateral required, to qualified members that have beenfurloughed, according to the credit union's website.

Other credit unions are also offering special assistance andemergency loans. The $1 billion HanscomFCUat Hanscom Air Force Base in Massachusetts began offering its LifeLine loan on March 1, the day the sequester cuts kicked in.

Members have access to a 0% APR interest line of credit for 30days, equal to one month's net payroll up to $5,000, according tothe credit union, and the loan is attached to the member's checkingaccount to provide additional funds to cover checks, ATMwithdrawals and debit card purchases.

Next Page: Pull the Penalties

4.Penalty-Free Early Withdrawls

Penalty-free early withdrawals on certificates of depositare another option many credit unions are offering to aid membersundergoing furloughs.

For members that need to redeem a certificate of deposit priorto its maturity, some credit unions, including Navy Federal, arewaiving early withdrawal penalties.

The $124 million Keys FCU in Key West, Fla., is also offeringpenalty-free withdrawal on share certificates to those affected bysequestration, according to a recent CUNA report, along with theability to skip one payment on an existing loan for no additionalfee, and a sequester loan in which members can borrow up to $5,000at 1% annual percentage yield for 36 months.

There's also no penalty for early withdrawal of sharecertificates at the $675 milion SACFCUinBellevue, Neb., which is also offering loan modifications, skip-payoptions, emergency short-term loans, and financial counseling, thecredit union said.

“We value our members and appreciate the hardship sequestrationis causing,” said Gail DeBoer, president and CEO of SAC FCU. “Ourgoal is to serve our members, whatever the situation.”

Next Page: It's in the Cards

5. ReducedFees and Credit Card Deals

The $71 million San Diego Medical FCU is among the growingnumber of credit unions offering no-fee sequestration loans andother services. Through Sept. 30, 2013,according to the 5,100-member credit union's website, qualifiedmembers can tap into a sequestration loan program thatoffers:

• No origination fees
• $2,500 available during sequestration
• 0% APR (through Sept. 30, 2013)
• Repayment begins Oct. 1, 2013 at 6% APR
• 24-month repayment period

Loans aren't the only areas experiencing fee reductions. NavyFederal announced recently that it is offering a special 3%fixed-rate APR on checking overdraft line of credit through June30, 2013 for federal government civilian employees that have directdeposit and are subject to furlough.

The $400 million, 42,000-member America's Credit Union inLewis-McChord, Wash., is offering expedited approval to increasecredit limits for existing ACU cardholders impacted bysequestration, according to ACU's website, and is also offering apromotional rate on purchases of 1.3% APR through Feb. 28, 2014 anda special balance transfer rate at 6.9% APR for life of thetransferred balance with no balance transfer fees.