Credit Unions Do Not Have Customers

Are credit unions behaviours attitudes and governance rooted in the past ?

“credit unions do not have customers, credit unions have members; the
members of a credit union own the credit union unlike the customers of other financial service providers…they are run by volunteers. (RESPONSE OF THE IRISH LEAGUE OF CREDIT UNIONS TO THE DEPARTMENT OF FINANCE’S CONSULTATION ON: FINANCIAL SERVICES LEGISLATION: CONSULTATION ON CONSOLIDATION AND SIMPLIFICATION BILL )

This wasn’t written in 1957, 1967, but in 2005. At the heart of this lies a belief and associated behavior that credit union members are different. So different that don’t need protection.

This is why credit unions do not produce transparent marketing, product information or decent annual accounts and continue with out of date practices that have been eradicated elsewhere.

Of course credit unions never overcharged loan interest (some have consistently) nor failed to repay cancelled RPI premiums (many have had to refund millions) and never take money from their savers accounts without their permission (many have and continue to do so).

But of course as they are “run by volunteers” their customers are not expected to require the same level of protection they have as customers of banks, building societies, insurance companies and brokers.

It’s a bit like saying that boards of voluntary hospitals don’t need to provide the same patient safeguards as private hospitals nor should their patients expect the same care and attention from their nurses and doctors.

In the same document ILCU continues in referring to any new credit union regulations:

“Many credit unions would also face similar difficulties in the financial services market. This is evidenced by the sharp reduction of credit unions in other jurisdictions (United Kingdom, Australia, United States, Canada and New Zealand) following the imposition of new regulatory requirements.”

There is quite a body of empirical evidence that credit unions are safer and have grown rather than declined under new modern credit union regulatory requirements. Quite frankly this Irish credit union argument is without foundation and unsupported by fact. What the ILCU all too conveniently ignore is the introduction of new regulations was a catalyst for modernisation, professionalisation, development and growth of all the movements listed. Of course the sentence to be correct should read “this is evidenced by a sharp reduction in the numbers of credit unions”…the word “number” has been conveniently omitted. Of course numbers delined for other reasons other than new regulations ...but saying so would weaken the case.

It is well known that Irish credit union leaders use misinformation and selective data in support of their case and defense of position. Their language is in turn translated by credit unions into misleading consumer information such as “your savings are protected up to €12,700”.

“Members” are not customers !
It seems then that once people become customers of an Irish credit union they unwittingly abdicate their rights as citizens to consumer protection and become "members".

The reality is that the majority of credit union directors cannot distinguish between the member as owner and member as customer and govern accordingly.

Try telling the people who save, borrow, buy insurance, foreign exchange and arrange mortgages that they are not customers or consumers and are not entitled to the same level of consumer protection as customers of banks.

Explain why, as the credit union board are “unpaid volunteers”, their life savings are not to be guaranteed by a state backed deposit insurance scheme.

Explain also why credit union boards and management are still not required to be authorised under a fitness and probity test when all other credit insitutions must comply.

Try telling the public why it is that the top 100 credit unions controlling €10bn+ of over a million peoples’ life savings are not to consider their “members” as customers. The largest credit unions after all have over €220m in savings with over 25,000 "members".

Believing that members are not customers has to stop. Credit union directors and their trade bodies must demonstrate they truly understand the difference between the member as owner and the member as a citizen,customer and consumer. Only then will proper credit union governance emerge.