10-11-2008 05:44 AM
I was checking my CC statements for accuracy the other night and noticed this little blurb added to last months NFCU statement:
SECTION 5 (SECURITY INTEREST) of your Credit Card Agreement and Disclosure has been amended as follows: You pledge to us a security interest in all your individual and joint accounts at NFCU. By using your credit card, you authorize us to apply funds held in your individual and joint accounts at NFCU to pay any outstanding debt with NFCU. Also, any collateral used to secure other loans with NFCU may be used to secure this account. The security interest does not apply to funds in an individual retirement account or to security in the borrower's primary residence.
I love NFCU, and so far and they've been great to me, but at the same time this has me a little boggled as to the nature of secured and unsecured revolving credit. The cards were issued as unsecured with no security deposit required, so I'm assuming that this is being done to everyone due to the credit crunch. I have no issues with them wanting an attachment to monies I have in accounts with them.
The bold portion, however, is what confuses me. They seem to now be able to hold a security interest in any "real" property that a person has financed with them. If that's the case, and it appears to be, doesnt this change the entire nature of how unsecured revolving debt is viewed across the board?
10-11-2008 06:34 AM
The security interest does not apply to funds in an individual retirement account or to security in the borrower's primary residence.
Basically they won't touch the things you need. But anything else is pretty much fair game.
The solution? Pay your bills. It actually makes me happy they're doing this, because it means that they'll lose less money on deadbeats whose loans they have to charge off.
Since this is a credit union, not paying their loans hurts every other member, because Navy Federal is a non-profit, so by paying for the charged off loan, interest rates are lower on deposits and higher on loans.
Now by repossessing these pieces of property used to secure loans and reselling them, they save on loan charge offs and can pass the savings on to all of the other members that are responsible enough to pay their bills.
Also: Navy Federal is very, very flexible in working with people through their Personal Finance Management program that works with members that are having trouble paying their bills. They actually lose a bunch of money trying to help them get back on track. So, if someone goes delinquent on a loan and it gets charged off, barring unexpected events such as costly medical bills or something, they most likely were living far beyond their means are were frankly, were being irresponsible.
10-11-2008 07:05 AM
Yes, I agree Jay. I am also glad they are doing this, for the very same reasons you mention above. A credit union has to look out for itself and its members so as to be able to provide the best level of services to everyone across the board. I see this as a form of internal risk management that is designed to protect its good standing members.
My OP deals with the issue of CC's, that were initially offered as "unsecured", that now have this new clause in the agreement. It does change the scope of what "unsecured" means in this case though, and is most likely an industry wide shift in terms of the risks that companies see with revolving debt in these tough times. I just dont remember ever reading any posts on ths board where -any- CC company has issued such a change to their CC agreement so as to be able to attach a lien on personal, let alone "real" property.
10-11-2008 10:59 AM
Hey Lucid and jaybird,
I'm also happy to see this language added to the CC agreement.
The more leverage Navy Fed has to recoup losses, the better
protected its responsible members are now and in the future.
And the best and simplest solution is to just pay your bills on time.
If you run into problems, just "man up" and tell them the deal. They'll
be happy to help you work thru any problems that might occur.
Thanks for creating this thread. This newest amendment will help those
of us who are responsible sleep better and keep away those folks who
think they can just stop paying unsecured debt and walk away unscathed.
The best just got better. Kudos Navy Fed!!!!
"The right attitude is everything"