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Vastly different , not for profit being the primary difference.
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CU set shares agains loan for terminally ill member, and now won't pay death benefits
- Thread starter Alwyn
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I’m fairly certain that most if not all credit unions don’t operate that way. The first/initial call on the shares would be to pay the outstanding interest due.
CU Manager
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That makes sweet fanny all difference - the loss to the credit union is the same either way. To suggest that applying the shares against outstanding interest somehow makes the situation more favourable for the CU is nonsense. The critical issue is that the balance outstanding becomes a bad debt and a cost to the CU. The account remains in default
It now appears that the alleged "defaulter" paid, like all the other members, for the free insurance.
It appears not!
In my opinion, the behaviour described here (and the defence of it) is more typical of a bank, or a insurance company, than a credit union. But perhaps this is a reflection that CU's are as over extended if not more than similar organisations. So will will act similarly to try and recover.
http://www.independent.ie/irish-new...-credit-unions-fear-huge-losses-30154288.html
http://www.independent.ie/irish-new...-credit-unions-fear-huge-losses-30154288.html
I know that we now have the benefit of hindsight and can see that the CU had no need to act so drastically and deprive the member and his nominee of any benefits AND the Members Savings.
If they had worked in the best interest of their member they could have come to a mutually beneficial outcome!
CU Manager
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Yes, the benefit of hindsightI know that we now have the benefit of hindsight and can see that the CU had no need to act so drastically and deprive the member and his nominee of any benefits AND the Members Savings.
If they had worked in the best interest of their member they could have come to a mutually beneficial outcome!
The logical conclusion to your suggestion is that, considering we will all die at some stage, and all the loans and savings are covered, is for everybody to stop paying in the sure and certain knowledge that the loan will be paid off and the savings increased when we die (and after all who knows when their time is up!). Just leave it to the less clued in to make the mistake of actually paying
I have little doubt that the CU had no knowledge of the members terminal condition (regardless of what the OP is saying) as they would have had no incentive to act as they did.
A much more likely scenario is that they tried in earnest to contact the member to no avail for months and may or may not have eventually had contact but the member did not inform the CU of his terminal condition and offered no payments on the loan leaving the CU with no choice but to do a share to loan transfer
CU Manager
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Clearly you didn't follow my post - the members actions while alive put his account into default causing the CU to transfer his savings off his loan and write off the rest as a bad debt resulting in a loss for the credit union. You seem to think that, in such a situation the defaulting borrower should be considered the same as a regular payer just because interest arrears were cleared with savings despite the fact that the remainder of the loan has to be charged off as a bad debt?
Simple example with two choices
Loan €10,000
Savings €4,500
Interest accrued €500
Choice 1
Write off loan and leave interest accrued
Bad Debt Loan €5500
Savings €0
Interest Accrued €500
Loss to CU = €5500
CU pursues defaulter for €5500 plus €500 = €6000
Choice 2
Write off loan but take interest first
Bad Debt Loan €6000
Savings €0
Interest Accrued €0
Loss to CU = €5500 (€6000 bad debt less €500 interest earned)
CU pursues defaulter for €6000
I take it that the above is simple enough for you to see that either choice is essentially the same
SNAP!
I think you accepted that the member’s savings were used to pay all outstanding interest due and a significant portion of the loan. That would be standard practice in all credit unions.
Where exactly is this
When the CU met the next of kin they would have mentioned that there was an outstanding debt - if there was any outstanding debt!
Would you not agree that the most likely scenario is/was that the CU claimed on its insurance and was reimbursed for the outstanding loan amount that they had previously written off?
After all that is exactly what Boomtobust has told us
It doesn't make a lot of sense that a CU would clear down shares off a loan, after only 3 or 4 months on what is probably a 3yr or longer loan. If they did there would be flood of people doing the same thing. Certainly a reason why they'd consider it, would be if they knew for certain a member wouldn't be continuing with them, ever.
CU Manager
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You have all the answers with the benefit of hindsightSNAP!
I think you accepted that the member’s savings were used to pay all outstanding interest due and a significant portion of the loan. That would be standard practice in all credit unions.
Where exactly is this
When the CU met the next of kin they would have mentioned that there was an outstanding debt - if there was any outstanding debt!
Would you not agree that the most likely scenario is/was that the CU claimed on its insurance and was reimbursed for the outstanding loan amount that they had previously written off?
After all that is exactly what Boomtobust has told us
Meanwhile back in the real world, real decisions have to be made based on real life (the hindsight button doesn't work for future decisions)The actions of the CU were clearly based on the actions of the borrower and the non payment of the loan.
A loss was incurred by the CU when writing off the loan (I am assuming the loan was written off)
The loss, being the net loan, was recovered by the CU by claiming on the LP insurance for the loan.
The insurance company will only pay based on the loan and share balance at time of death so net loan was paid off but borrower has no savings so no top up insurance claim) The OP's SIL is looking for the amount that would have been payable if the loan had been in good order and no share/loan transfer had occurred.
In that case the gross loan would have been cleared and the savings doubled (up to a limit and age dependant).
The insurance company will not pay out the larger amount now - as they are only bound to pay based on the account status at time of death.
The OP and her SIL appear to be seeking for the CU to make up the difference - this could be €20K, €30K or higher (we don't know the figures)
The CU would have to fund such a payment from the income earned from good paying members to effectively gift the amount to the estate of the defaulting borrower - clearly such an outcome would be perverse! Moral hazard, how are ya?
CU Manager
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I presume your question is rhetorical and you think you're being smart.
A loss was incurred initially in having to write off the defaulting loan.
That loss was recovered by the LP insurance claim. However a new loss was incurred when the borrowers widow pushed to have a death benefit claim paid. The claim would have been paid by the CU not the insurance company so the full cost of the death benefit paid out is a loss to the CU.
A significant further loss will accrue if the CU gives in the the widows current demand for the higher payout
Fixed your post ...
You appear to see this as next of kin trying to hold the credit union to ransom for benefits they are/were not entitled to!
From my point of view I see this as a failure by the credit union. They acted in haste and now, I suspect, are repenting at leisure hence the delay in the “Final Response” letter.
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No repenting required. A defaulter is a defaulter and is not entitled to the benefits when he didnt pay his loan.
Your point of view is not a rational one. I have presented a very rational view on the reality of this situation. Some people have an unrealistic utopian view on life and think that the big bad financial institutions have some sort of magic wand and limitless funds to make everything alright
What have I posted that was not rational?
CU Manager
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What have I posted that was not rational?
You have effectively posted that a defaulter should be treated to the same benefits as a paying borrower. That is not rational. I outlined the logical conclusion to your irrational position earlier (we will all die eventually so why pay -it will be paid off by LP insurance eventually when we die). You ignored this (and other posts) because it didn't suit your irrational position.
I either posted or I didn't! If I posted then quote me!