Credit unions are not necessarily better than big banks

Re “Credit unions more ethical, reliable than big banks” by John Radebaugh.

Radebaugh stated that 10 years ago, banks contributed to the financial crisis by opening bank accounts for additional fees to increase the bank’s income. The customers did not have any knowledge and did not authorize the bank to open those accounts, i.e. bill pay, savings, debit cards, credit cards, etc.

I am not aware of any banks being charged with opening unauthorized accounts for customers in order to increase the bank income during the mortgage bubble crisis.

Recently, Wells Fargo did step out of bounds with their method of cross-selling to achieve excessive goals by putting extra pressure on their front-line employees to cross-sell other services to their customers. The pressure to cross-sell in order to keep their jobs was way below the industry’s ethical standards.

Today, the majority of banks and credit unions train their customer contact employees to cross-sell services and products to customers: debit cards, credit cards, bill pay, credit life and disability coverage on consumer loans, etc.

The reason for cross-selling is twofold: Increase the bottom line and retain customer base. Mr. Radebaugh claims the credit union culture is to do anything for members by charging low loan rates and paying higher rates on savings, certificate of deposit and individual retirement accounts.

My research shows that credit union and bank rates are very comparable. Credit unions cross-sell other services, such as credit life and disability protection, vehicle warranties and guaranteed asset protection.

Two laws, he Community Reinvestment Act and The Glass Steagal Act, contributed to the mortgage financial crisis. Along with that, two government entities - Freddie Mac and Fannie Mae - encouraged banks such as Bank of America and Countrywide Mortgage Company to make subprime mortgages, which in turn, Freddie Mac and Fannie Mae would purchase the mortgages.

Of course, Freddie Mac and Fannie Mae had to be bailed out by the federal government (taxpayers). It was not caused by fees collected from customers.

I am a retired commercial banker from Pennsylvania with 43 years’ experience.

The writer lives in Murrells Inlet.

This story was originally published October 14, 2016 at 4:34 PM with the headline "Credit unions are not necessarily better than big banks."