Reports of banks closing credit union correspondentrelationships have extended to New York and New Jersey, wheremembers of the $1.4 billion Alloya Corporate FCU have faced the same rush to find newservice providers as credit unions in West Virginia and Ohio.

Alloya Vice President of Marketing Victor Vrigian Jr. said hisWarrenville, Ill.-based corporate has heard from 10 members in theNew York City area who say Chase Bank informed them within the lastcouple of months that they had to find new service providers to dothings like process transaction items and provide cash and coinservices.

Vrigian said another seven credit unions in New Jersey havefaced the same prospect so far this year, from a variety ofbanks.

“This seems to happen every 18 months or so,” he said. “Therewill be a group of credit unions somewhere that will be affected bya bank winding down certain operations. It's not infrequent andtends to happen in little pockets of geography.”

Interestingly, Vrigian said Alloya members were not told theaccounts were closed due to the inability of the banks toeffectively comply with the Bank Secrecy Act or anti moneylaundering rules, as credit unions in Ohio and West Virginia weretold.

“In a couple of cases, the bank specifically said the accountwas 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 saidoftentimes the banks don't give their credit union customers morethan a few weeks' or a month's notice to find new correspondentservices providers. When credit unions choose to switch theaffected services over to Alloya, Vrigian said the corporate findsway to expedite the normal process to avoid service interruption tomembers.

As reported by the $1.4 billion Volunteer Corporate Credit Unionand the $3.7 billion Corporate One FCU, some affected Alloyamembers have chosen to move their services to the corporate, whileothers have preferred a local bank or large credit union in theirmarket to provide the necessary services.

“There really is a difference between working within thecooperative system and working outside it,” Vrigian said. “I can'tever recall hearing of a corporate telling a credit union they havejust days to make changes.”