CU set shares agains loan for terminally ill member, and now won't pay death benefits

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Alwyn

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My Wife's Brother passed in June of this year. He had death insurance policy with his local credit union.

He paid the policy at the beginning of the year but when his illness became terminal his finances went into disarray and he did not pay his Credit Union loan for 3 to 4 months.

The Union was informed but they declined his offer of a small repayment token each month and subsequently used all his shares to pay off his loan.

Sadly my Brother - In - Law passed away and the Credit Union will not release his death policy to his Partner because his share account was void of funds.

His Partner meet with the CU and was informed it was CU policy once there was zero funds in the account. At no time did he or his partner ever ask the CU to use his shares against his loan account.

Have you been in a similar position?
 
Hi

Can we clarify things here. There are three potential death benefits. I think that they vary from Credit Union to CU. This is what Sandymount Credit Union offers for example:

[broken link removed]

1) Loan protection
The loan balance is paid off

2) Life savings
The amount of shares is doubled.

3) Death benefits
This is a separate life insurance policy which is offered by some credit unions

Let's say your Brother in Law had €10,000 of a loan and €10,000 of shares.

On his death, the loan would have been paid off in full. He would have got €10,000 in shares back and an additional €10,000 of cover. So his partner would now have €20,000.


A Credit Union does have the right so set shares against a loan, when it is in arrears.

Did the CU know he was terminally ill? If they did know this, and set the shares against the loan to avoid two separate insurance payouts, then it is sharp practice. Using the above figures, they have saved themselves €20,000.

It sounds from your account, that your brother in law was treated very badly. You should complain to the Manager and then to the Board. Go to the AGM and kick up a fuss about this.

Make sure to collect some brochures and advertising from the CU involved. Most of them parade their "free" insurance as one of the benefits of membership.


If you get nowhere, take a complaint to the Financial Servcies Ombudsman.

Brendan
 
Boomtobust said:
....
He paid the policy at the beginning of the year but when his illness became terminal his finances went into disarray and he did not pay his Credit Union loan for 3 to 4 months.

The Union was informed but they declined his offer of a small repayment token each month and subsequently used all his shares to pay off his loan.
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Firstly, condolences to you and your wife on the death of your brother-in-law. Your post needs clarifying. You say your BIL "..paid the policy at the beginning of the year..". This sounds more like payment protection insurance, PPI, than DBI to which Brendan refers(with DBI there is no need to make a payment to activate the policy). If your BIL fell into arrears and was unable to reach agreement with the CU regarding his repayments, then the PPI part of his loan repayment would also be in arrears and the insurance company would probably be within their rights not to pay out. Usually, a credit union only sets shares off against a loan in the last resort, after all attempts at negotiating repayments have been unsuccessful. Perhaps there was a lack of communication with the CU?
 
Thank you both for your information on this thread.

I have spoken to B-I-L's partner and can confirm the following.

There will be no payout on PPI Insurance which she can totally understand

Debt Insurance Policy will not be released due to the fact that there was zero shares in her partners CU share account. As mentioned previously, there were shares in the account but these shares were deducted and placed off his loan account without his knowledge.

She has been informed by CU that a member must have X amount of shares for a Death Benefit Insurance payout. As all shares have been removed from his account there can however be no payout.

The CU were informed that the member was under financial difficulty and could only pay X amount per week. The revoked this offer and immediately emptied his share account.

At no time were they informed of his illness as he passed away rather suddenly.
 
Hi Boom

Could you edit this please as it's confusing

The revoked this offer and immediately emptied his share account.
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I don't know what offer and who you are talking about.

Is "The" , They (The CU) or he (The borrower)?

Brendan
 
Hi Brendan,

The borrower offered the CU a reduced payment schedule because he was no longer in full time employment and could not meet the required loan repayment. He asked for a temporary reschedule of his loan payments.

The CU declined to offer a payment reschedule and subsequently emptied the borrowers share account, without his say so, and placed it against his loan.

During a very short period of time (the borrower's health deteriorated much quicker than expected) communication with CU became less so. But from what we gather, he did write to them explaining that he was unable to meet his commitment fully for X amount of weeks but the CU began to act quickly.
 
OK

Can you give us the numbers? Had he shares to match the loan?

He probably should have withdrawn shares to the value of each month's repayment.

It is a members' organisation and his partner should complain. They may have been entitled to set the shares against his loan, but they probably should have advised him that they were doing it.

Brendan
 
Boomtobust said:
The CU declined to offer a payment reschedule and subsequently emptied the borrowers share account, without his say so, and placed it against his loan.
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Have you seen the actual correspondance from the CU, I'd be very surprised that they didn't inform him of what they would do if he didn't keep up his loan repayments and they had declined his modified payment schedule. What did he think would happen once they declined his offer? Does his wife know?

Obviously this is a tragic time for all involved. But it doesn't look like the CU did this so he would lose the life insurance.
 
Boomtobust said:
Hi Brendan,
..The CU declined to offer a payment reschedule and subsequently emptied the borrowers share account, without his say so, and placed it against his loan..
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There is usually quite a lot of time and correspondence in between rejecting an offer to make payment and the decision to set shares off. If the period of time was indecently brief then I think his partner has cause for complaint.

Was the share balance adequate to pay off the loan? Anything left to pay? Normal expectation would be that Loan protection insurance would clear the loan and Death Benefit would pay out to the nominee (your BIL's partner was nominee, wasn't she?).

If the payments were missed and no realistic repayment schedule was possible and the CU was unaware that your BIL was ill, then over the period of up to 1 year, the CU may take the decision to write off and set off.
 
Hi Slim

Say a member has a loan of €10,000 and shares of €10,000 and advises you that they are terminally ill.

What would the CU attitude in general be?

Do you remind them of the benefits of the insurance and tell them to make sure that they don't pay off their loan quicker than the schedule and that they try to keep their shares? Or do you encourage them to clear both as it saves you paying out on insurance?

Brendan
 
Credit Unions get much abuse about continuing to charge high interest on loans when the shares that are earning very little dividend could pay off the loan. This is seen as sharp practice to earn interest revenue. In most cases you can see how the credit union's action would benefit the member. There are always exceptions, like this case.

The various insurances are covered by policies external to the individual credit union so I do not see any financial benefit to a specific credit union by avoiding a claim.

It is still worth collating all of the correspondence to see if the credit union followed their processes or whether their actions were premature
 
ontour said:
The various insurances are covered by policies external to the individual credit union so I do not see any financial benefit to a specific credit union by avoiding a claim.
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So is the claims experience of a particular credit union not a factor in the premium they pay the following year?

If so, then the CU should have definitely explained the consequences to the member as it cost them nothing. They should have done this anyway.
 
Some of the insurance was / is tied to membership of the Irish League of Credit Unions for those credit unions that are part of that organization. When I last saw it, the 'premium' was a flat charge for each member a credit union had - the varying risk or claims profiles of individuals or individual credit unions were not considered.

This is not the same for all forms of insurance in the credit union.

I know of a number of cases where people have 'put their affairs in order' due to illness. Whether it was paying off loans or moving money from the credit union to a current account to pay funeral expenses, the net effect was a financial loss after their death. They tend not to explain their motivations to the credit union teller so it is difficult for the credit union staff to advise them against their action.

A teller isn't going to tell everyone withdrawing money or paying off loans that their beneficiaries will lose out if the member dies tomorrow.
 
I dont know if this is any help but I had shares valued at 1/4 of the outstanding loan. I missed repayments and asked for a reschedule.

It took 6 months for the credit union to offer to use the shares to reduce the amount outstanding.

I had to sign a letter and return it in person to the CU before the transfer took place.

Also they would not reduce my shares to zero for some reason that escapes me now, they left about €220. The loan is for much more.
 
The 220.00EUR keeps your Death Benefit Policy standing. Interesting that it was six months before CU would offset your shares against your loan. In my B-I-L's case they offset the shares within a period of 9 weeks.

Borrowers partner meet with the CU today and they are refusing to reinstate the shares.

Borrower had 5k shares and 8k loan
 
She will have to complain to them in writing and see what explanation she gets

Then it's off to the Ombudsman with her, if their explanation is not satisfactory.

They will have to have a well publicised policy on this.

I fully understand that if a borrower goes into arrears, their savings should be run down to pay off the arrears. But, in a situation like this, the full amount should not be set off against the loan.

There are so many cases on askaboutmoney where the Credit Union refuses to allow the healthy borrower to set their shares off against their loan. In this case, they seem to have done it without asking.

Brendan
 
Thanks Brendan. She wrote to CU and their explanation was simply that it was their rules. A complaint to the ombudsman is essential as suggested.

Will keep thread updated when I hear more.
 
Brendan Burgess said:
Hi Slim

Say a member has a loan of €10,000 and shares of €10,000 and advises you that they are terminally ill.

What would the CU attitude in general be?

Do you remind them of the benefits of the insurance and tell them to make sure that they don't pay off their loan quicker than the schedule and that they try to keep their shares? Or do you encourage them to clear both as it saves you paying out on insurance?

Brendan
Click to expand...

Sorry Brendan, didn't pick up on the post til now. Any credit union worth its salt would advise whatever would be in the best interest of the member. The Loan Protection/Life Savings (LPLS) insurance has provision for death and serious illness, so as long as the CU was informed they should advise the member to keep payments up to date and not reduce savings below a certain level so as to optimise the benefit to the member. (of course, there are T&Cs woth every insurance) The payout is from ECCU, a separate insurance company. Insofar as the insurance is mutual, I suppose the CU pays in the end for higher claims, but that kind of calculated cynicism is far from the minds of most CU staff/directors.

I am not directly involved in CU anymore. There is much unknown in this particular thread that needs to be clarified. I think the partner needs to write a formal complaint to the 'Complaints Officer' at the CU(they are obliged to have one) and seek a formal response. Only then should they contact the FS Ombudsman. Slim
 
I accompanied my SIL to an arranged meeting with the manager of the CU. He sympathized with her loss but immediately got down to business, explaining that the CU did inform her partner what there intentions were.

We asked how they made contact with the the deceased before his passing and we were simply told he had been written too.

MY SIL does not recall any letter ever been sent from the CU to her Partner as she was looking after his post while he was ill.

I asked the manager to produce a copy of the so called letter that was sent and he printed off a notification correspondence that was sent during my BIL's illness. This letter was never received. If it were, she would have obviously dealt with it immediately.

Having left the CU we contacted the Ombudsman who wrote back stating that they did not believe her issue with the CU had fully concluded and they could find no trace of any complaints made by her to the CU. Not exactly their wordage as I don't have their letter in front of me but along these lines.

I am as confused by her responses from the authorities as I was the first day I started this thread.
 
Hi boom

You must make a formal complaint to the Credit Union.
They must issue you what is known as a Final Response Letter.
The Ombudsman cannot hear your complaint until you get this letter.
In their letter telling you this, they should have told you the name of the person in the Credit Union to whom you needed to make the formal complaint.
Have another read of the letter from the CU and see if that is included.

If not, write to the Manager of the CU, set out your complaint and ask for a Final REsponse Letter.

As the CU is a members' organisation, I would probably first contact the Chairman and say that this is no way to treat a member.

Brendan
 
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