Credit unions vs. banks

By Simpleton
January 02, 2006
Credit Union Logo
Credit Union Logo -
Credit unions are not like banks. Firstly, credit unions do not have customers or clients, not in the sense that a bank would have customers or clients. Credit unions have members, which own shares in the credit union, and are, essentially, the owners of the credit union.

Credit unions are formed based on a bond of association. Usually, this bond of association is a commonality that joins people by employment, membership in an organization such as labour union, or just the mere fact that people live in a particular community.

The credit union that I had belonged to, had as its initial bond of association, the fact that its members were employed by Polymer (Polysar) Corporation, or a relative of a person employed at Polysar. Hence the name Polysar Employee's Credit Union.

Over time, the credit union grew, and consequently, the bond of association grew. As the credit union merged with other credit unions, the bond of association, or the membership entitlement restrictions, grew to include an even broader range of people.

Anyway, there are many reasons for choosing a credit union for your financial needs as opposed to a bank. Some of these reasons include the fact that credit unions generally offer a better interest rate on deposits, and charge a lesser interest rate on loans than do other financial institutions. Credit unions also charge fewer service fees and provide more free services than a conventional bank or trust company.

One of the most compelling reasons to belong to a credit union, as opposed to a bank or trust company, is that membership entitles members to certain legislated rights. Among these legislated rights, is the fact that a credit union does not get the right to refuse service to whomever they please. A credit union cannot merely toss you out of the credit union on a whim. There is a legal process that a credit union must follow in order to expel a member and the member is entitled to appeal both to the board of directors and to the general membership.

There are exceptions however. Occasionally you will run into a credit union that is controlled by a power other than the membership. These rogue credit unions break the law and act according to the whims of a select few, in stark defiance of the bylaws, laws, and the general membership. Lambton Financial Credit Union is one such credit union.

Your rights as a member of a credit union:

I currently have a complaint before the Financial Services Commission of Ontario that alleges that Lambton Financial Credit Union contravened section 47 of the Credit Unions and Caisses Populaires Act.

Section 47 of the Credit Unions and Caisses Populaires Act defines the process and grounds for which a credit union may expel a member. The grounds on which a credit union may expel a member are very clearly defined, and the rights of the member are also firmly established.

The law requires that a credit union only expel a member by resolution of the board of directors. And that this resolution be made at a meeting duly called for this purpose.

Second, the law requires that a credit union provide a written notice to the member at least ten days prior to the commencement of such a meeting.

The law requires that a member be permitted to make submissions to the board on his own behalf, and to explain why he/she should not be expelled.

If the credit union chooses to expel the member, and passes a resolution expelling the member, the credit union must send written notice of the expulsion to the member, by registered letter mail, within five days of the board meeting resolving to expel him/her.

The expelled member then has the right to appeal the expulsion to the general membership at the next general meeting of the members. The members may, by majority vote, elect to stay the expulsion decision of the board, or set the resolution aside. The decision of the members is final and binding.

Any expulsion of a member by a credit union without prior written notice is not valid, and the expelled member may complain to the Financial Services Commission of Ontario.

Any expulsion of a member by a credit union that does not allow the member to appear before the board expelling him/her, is also not valid and you may complain to the Financial Services Commission of Ontario.

People choose credit unions over banks and trust companies for a reason. One of these reasons is the rights afforded the members by the legislation of the province. Credit unions would do themselves a great service by remembering that they do not own the members, the members own them.