Credit unions have been located on military installations for more than 85 years, providing service members access to credit and a safe place to keep their savings. But they also represent a crucial partner of the military that contributes millions of dollars annually to a variety of on-base activities, including special events, schools and recreation.
In addition, many defense credit unions have added branches in the surrounding communities as they have grown and serve military members living off-base and those who have separated from the military. In that capacity credit unions continue to invest in the community, contributing to civic causes and helping to promote the area. Defense credit unions contributed a total of $11 million to military and community needs in 2016, and provided 60,000 hours of volunteer service, according to the Defense Credit Union Council.
The special relationship between credit unions is enshrined in DOD regulations, which bar more than one credit union from being located at an installation. Similarly, no more than one bank can be located at an installation. The regulations also prohibit off-base financial institutions from engaging in most forms of marketing on an installation.
Limiting marketing activities as well as the number of credit unions and banks on bases is critical to the industry’s financial health and to the benefits they offer installations and military families, explained Anthony Hernandez, the council’s chief operating officer. Credit unions are nonprofit entities, so instead of retaining profits, they reinvest those funds into the community, Hernandez said. Examples of the support credit unions have provided to on-base activities include:
- $25,000 for equipment at a playground;
- $2,000 to an on-base public school;
- purchasing tickets to a military ball to distribute to service members;
- covering costs for junior enlisted members to travel home for family emergencies; and
- sponsoring a summer bash/sports day.
Defense credit unions are “part of the community fabric,” he said. When installation commanders need help funding a quality-of-life initiative, the base credit union is often the first place they’ll turn.
Beyond providing direct support for on-base activities, credit unions benefit military members by offering higher interest rates for savings and lower rates on loans compared to banks, Hernandez said.
As the liaison for credit unions with the DOD, the council is awaiting the department’s impending update of its regulations for financial institutions. In addition to preserving the rules restricting the number of financial institutions on an installation and the marketing activities of off-base institutions, the council also will be paying attention to language guaranteeing credit unions land leases at no cost. At this point, Hernandez said he doesn’t have any indication of what changes DOD will include in the updated rules.
Financial Education Mission
Defense credit unions also partner with the Pentagon to provide financial education to military families. They held more than 4,000 workshops, seminars and classes in 2016, reaching 170,000 participants, according to the council. In January, the council released a 36-page guide to the military’s new retirement system, which takes effect Jan. 1, 2018. Under the new blended retirement system, most members who don’t serve for 20 years will be eligible for benefits for the first time through government contributions to an individual’s retirement account. Active-duty members with fewer than 12 years of service as of Dec. 31, 2017, will need to decide whether to opt in to the new blended system or stick with the military’s existing pension system.
The council wanted to offer a tool that service members and their spouses could take advantage of, Hernandez said in explaining why it produced the guide, which is available on the council’s website. “We developed it to get into the homes so people could understand the choice that is available starting this January,” he said.
Another issue the council is focusing on is the implementation of amendments DOD issued in 2015 to its rule covering the 2006 Military Lending Act. The amendments extend many of the protections provided in the original law — including capping the annual percentage rate for consumer loans at 36 percent — to a wider range of credit products. The council advocates on behalf of smaller credit unions that don’t have the resources to ensure they are complying with the new rule’s reporting requirements, Hernandez said.