Credit Unions Ask Customers To Leave

Credit unions might be attractive alternatives to big commercial banks, but they’re not crisis-proof. OregonLive says about a fifth of the nation’s credit unions are having financial troubles right now. To get in better financial health, they’re introducing fees for services that have long been free, and even asking members to move their deposits to other institutions.

OregonLive says part of the problem comes from corporate credit unions that have made bad investments. Local credit unions rely on corporate credit unions for financing, so when the National Credit Union Administration (NCUA) has to take over one of these it not only wipes out a source of financing but forces local credit unions to pony up more cash–$1 billion last year–to rebuild the NCUA insurance fund. The other problem is that members of credit unions are traditionally poorer than average bank customers, so when they can’t pay their loans, the credit unions get hit.

Point West Credit Union in Oregon is one of the places where members are being asked to go elsewhere before the credit union is destroyed:

Like other credit unions, it has seen a flood of deposits from consumers seeking safety, higher returns and an alternative to fee-heavy, bailed-out big banks. But Point West can’t make auto and consumer loans fast enough to generate income to offset the costs of serving those members.

“We realize we can’t make enough income fast enough to get in a better net worth ratio,” said Robert Barzler, Point West’s CEO and president. “We actually have to shrink the credit union by shrinking the deposits. It’s something we’ve proactively done in order to protect our members and save the credit union.”


Here’s another example of a credit union asking its members to go away, this time in Nevada. (Thanks to Jaime!)

“It’s crunchtime for Northwest credit unions “ [OregonLive] (Thanks to varro!)