Banks Vs Credit Unions
Working for a large bank, the rules are very cut and dry. As a supervisor I was responsible for making sure that my staff was trained annually on many subjects, such as lending rules, check handling, holds on checks, etc. There was a lot of consistency among the branches in how these items were handled.
When I went to the credit union I was surprised at how many of these subjects were brushed aside. I had been trained in the banking industry that check holds were federally regulated, yet the credit union regularly overlooked those requirements. One example that comes to mind is a ‘member’ makes a large deposit into their account, often even having matching funds.
After leaving the office, several days later they would call in or visit a branch and need to withdraw funds in the form of a cashiers check. The member would be told that the funds had to be on deposit for 10 business days before a check would be issued.
The manager of the office would occasionally offer cash on special order but it would not be available until the 10th day. The member’s funds had not had a hold placed on it, and they did not receive any type of notice that a hold had been placed as is required in a commercial/consumer bank. This occurred frequently at the credit union.
Another instance that occurred several times during my years at the credit union as well as at a bank involved lending. The difference is how the Credit Union handled it was quite different from the way a Bank resolved the situation.
Credit Union loans can be accelerated more quickly than a bank or finance companies loan. On occasion a New Accounts Representative or Lender will make an error in drawing up loan documents, in the instances that I saw the loan rate was lower than it should have been. At the bank, we were required to apologize, and eat the loss. At the credit union, the member’s loan was called due and payable in 30 days. This is hardly fair to the consumer.
Another ethics issue with the credit union was the ability of the upper management to follow the letter of the law. Credit Unions are involved in an auto loan program called Credit Union Direct Lending or CUDL (cuddle) for short. This is a 3rd party vendor that basically runs the paperwork from the dealerships to the CU’s electronically including a credit score so the consumer has a quick answer for their loan right at the dealership.
The CUDL program has a set loan document indicating what the late fee is. The Credit Union that I worked at pre-loaded a late fee of $15.00 into their computer system. The VP of Lending for the Credit Union was aware of this.
Many of the car loans that incurred late fees should have been charged less than $15. After 60 days of emailing the loan department, pulling out copies of the loan papers to prove that the fees were being charged incorrectly I personally received an email stating that the VP was aware of this and planned to continue charging the higher amount.
This was in violation of the borrower’s contracts as well as the contract with the CUDL program. This was finally resolved when it was presented that the Credit Union could be fined by the government, but the VP was still adamantly against it.
There were also several issues with credit cards that would shock you. After working closely upper management in the corporate office of this credit union I truly believe that large credit unions offer the same services as banks. Conversations also focused on profit and where they can get more money and how they can benefit the upper income members while ignoring the lower income members.
Small credit unions still need to be kept separate and receive the benefits of being a credit union, but the large credit unions should be evaluated and a criteria should be set up to indicate where they cross the line and become a bank.