HARRISBURG, Pa. -- Five members filed a lawsuit against Belco Community Credit Union on Sept. 18 claiming the financial institution failed to disclose the commissions it earned through it's partnership with CUNA Brokerage Services Inc., which they say resulted in losses to their retirement savings.
Rob Bleecher, the attorney representing the members, told Credit Union Times that the $268 million credit union allegedly breached its fiduciary obligation by failing to disclose that it was earning commissions from CUNA Brokerage based on a compensation program the plaintiffs were enrolled in. The members are seeking $50,000 in damages.
"The overriding matter here is full and fair disclosure," Bleecher said. "The credit union encouraged members to go meet with financial planners without disclosing there was this contract."
The members participated in a retirement program that was subject to withdrawals of a certain percentage of their assets each month, Bleecher said. In many cases, if the withdrawal rates are too high, investors could up end pulling principal out of their retirement accounts, he explained. If a bear market were to occur shortly after an individual retires, "they can get behind and run out of money in a short period of time."
The two married couples and one individual involved in the suit have been with Belco for more than 20 years and had worked with the same CUNA Brokerage financial planner since the late 1990s. Bleecher said the losses could potentially run from $100,000 to $500,000 based on a calculation of when the members would retire and what they would have earned "if properly invested."
Lonny Maurer, president/CEO of Belco, said given the sensitive situation, he did not want to comment on the suit and referred questions to CUNA Mutual Group, the parent company of CUNA Brokerage. Bleecher said a complaint has been filed against the broker-dealer with the Financial Industry Regulatory Authority, which regulates securities firms.
CUNA Mutual said the lawsuit does not hold water and is more the result of a tumultuous marketplace.
"We certainly think the suit is without merit because it's based on the fact that these people lost money in a bear market that no one could have predicted," said Maripat Blankenheim, manager of media relations at CUNA Mutual.
Blankenheim said CUNA Mutual and CUNA Brokerage make decisions and give advice based on the best information available at the time, which could and does change, depending on the market.
"None of us have a crystal ball, least of all the people at the credit union and certainly not those at CBSI," she said. "That's unfortunately the hand that all of us are dealt. It's unfortunate that these folks were in the position that they were, but they have no recourse coming."
This is not the first time members have sued Belco. In a case filed in 2007, five other plaintiffs made similar allegations involving the same CUNA Brokerage financial planner, Bleecher said. The members in that case are seeking $50,000 and the case is pending, he added.
In the more recent case, Bleecher said he is waiting on Belco to respond. The FINRA complaint against CUNA Brokerage is in the early stages, he pointed out.