MADISON, Wis. — The Filene Research Institute has released aresearch paper on member card behavior that suggests credit unionsget involved with members stressed about their debt earlier ratherthan later.

Authored by Filene CEO Mark Meyer, the research brief citedpreviously published research indicating that credit card debitcould become as big a problem as mortgage debt.

“Could credit cards cause a financial disaster similar to thesubprime mortgage crisis?” Meyer asked. “Some analysts believe itcould easily happen given consumers' ever-increasing reliance oncredit cards, current credit card debt levels, increasing defaultsand the fact that investors hold billions of dollars in securitizeddebt backed by credit card receivables.”

Meyer cited analysis showing that consumers are using creditcards to replace the role that home equity lines of credit–nowdried up–used to play and that, overall, the credit crunch couldend up damaging credit unions as members struggle to keep currentwith their overall debt loads.

In response, Meyer urged CUs to continue to offer members creditbut carefully and proactively.

“Help your members avoid pushing the panic button,” Meyer wrote.“Target members [those with annual household incomes of less than$60,000, aged 35--44, and women] with information and offers ofassistance in dealing with unexpected credit card term andcondition changes. Educate members about predatory credit cardterms and conditions and the potential adverse impact. Offer credit(as appropriate) to those who have been turned down elsewhere.”

Meyer also cited research from Ohio State University's ConsumerFinance Monthly, which indicated that not all consumers or creditunion members experience debt-related stress the same way. Thesurvey found that middle-aged consumers and women experience moredebt related stress.

“Respondents who are widowed or have never been marriedgenerally report higher levels of debt-related stress than do thosewho are married or divorced,” the report said.

“In particular, people who have never been married are morelikely than their counterparts to worry frequently and be highlystressed about total debt, to anticipate significant debt-relatedproblems in the future, and to be highly concerned about theirability to pay off their debt.”

On the other hand, those who are widowed or divorced are morelikely to indicate that debt has caused very or extremely seriousproblems for their families. Perhaps widowers are struggling to payoff their spouse's medical expenses, Meyer hypothesized. Debt couldalso be a factor in the decision to divorce, he added.

Meyer recommended credit unions continue to market their owncards to their members as consumer-friendly alternatives to many ofthe cards offered by larger issuers.

He urged credit unions to promote their more consumer-friendlycredit card terms and conditions and help members learn to selectcredit cards with the most favorable features.

Where they can, he also suggested CUs allow their members totransfer card credit card debt from other cards to credit unioncredit cards or debt consolidation loans and assist members withclosing higher-cost accounts at other financial institutions.

Finally, Meyer urged credit unions to see the opportunity in thecurrent situation presented by banks that are tightening access tocredit. “Cross sell your credit card and other products/services tomembers who are frustrated and fed up with their banks,” Meyerurged.

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