Tuesday, January 22, 2013

Not a Single Applicant Was Previously A Member

In a recent CUES Skybox column, Jim Devine had an interesting observation about whether businesses that were applying for credit from a credit union were members of the credit union before applying for the credit.

Jim Devine wrote:
"Part of my job is to do portfolio reviews. I looked at 40 loans at one credit union and found that not a single applicant was previously a member."

I suspect that this is not an isolated case.

This should be a concern for exisitng credit union members.

Business loans tend to be larger and riskier. This means the net worth of the credit union could be put at risk from a borroweer who has no real connection with the credit union.

Moreover, if a business or any other borrower is not a member of the credit union before applying for credit, how is the credit union any different from other financial institutions?

When Congress in 1951 revoked the tax exemption for mutual thrifts, it found that “investing members are becoming simply depositors, while borrowing members find dealing with a savings and loan association only technically different from dealing with other mortgage lending institutions in which the lending group is distinct from the borrowing group.”
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1 comment:

  1. AnonymousJanuary 22, 2013 at 12:13 PM

    You have identified the Business Model(BM) at TELESIS CREDIT UNION. Not only were they not members, the majority of these business debtors did not live, work, or reside in CA. Look at the business loans, AR, FL, OR, WA. If they could fog a mirror these business loans were fully funded. And TELESIS was the poster child for raising the MBL limit, too. Credit Unions need to be careful what they wish for because it Mayo not work out so well for them. Sadly, nation wide other credit union have adopted this BM.

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