Reports of banks closing credit union correspondent relationships have extended to New York and New Jersey, where members of the $1.4 billion Alloya Corporate FCU have faced the same rush to find new service providers as credit unions in West Virginia and Ohio.
Alloya Vice President of Marketing Victor Vrigian Jr. said his Warrenville, Ill.-based corporate has heard from 10 members in the New York City area who say Chase Bank informed them within the last couple of months that they had to find new service providers to do things like process transaction items and provide cash and coin services.
Vrigian said another seven credit unions in New Jersey have faced the same prospect so far this year, from a variety of banks.
“This seems to happen every 18 months or so,” he said. “There will be a group of credit unions somewhere that will be affected by a bank winding down certain operations. It’s not infrequent and tends to happen in little pockets of geography.”
Interestingly, Vrigian said Alloya members were not told the accounts were closed due to the inability of the banks to effectively comply with the Bank Secrecy Act or anti money laundering rules, as credit unions in Ohio and West Virginia were told.
“In a couple of cases, the bank specifically said the account was not profitable,” he said. “They have given multiple reasons, but none specifically cited BSA or MLA.”
Finding a new vendor is difficult enough, but Vrigian said oftentimes the banks don’t give their credit union customers more than a few weeks’ or a month’s notice to find new correspondent services providers. When credit unions choose to switch the affected services over to Alloya, Vrigian said the corporate finds way to expedite the normal process to avoid service interruption to members.
As reported by the $1.4 billion Volunteer Corporate Credit Union and the $3.7 billion Corporate One FCU, some affected Alloya members have chosen to move their services to the corporate, while others have preferred a local bank or large credit union in their market to provide the necessary services.
“There really is a difference between working within the cooperative system and working outside it,” Vrigian said. “I can’t ever recall hearing of a corporate telling a credit union they have just days to make changes.”