Credit unions no longer a safe haven?

In this ever-changing and tumultuous world of consumer credit, no borrowers are completely safe from the whims of frantic lenders--even the so-called safe ones. Often considered the best option for consumer loans, credit unions are becoming more like their rogue cousins: commercial banks. 

Based on recent e-mails and comments sent to me from frustrated consumers, credit unions are beginning to adopt and to implement changes to their credit card accounts, including increased interest rates and stricter terms.  This comes as a surprise given that amid the widespread outrage against commercial banks, credit unions have been touted as the safe alternative.   

One such customer wrote me:

“… Banks are getting worse than ever. Even credit unions are picking up some of their nasty tricks. Mine raised my credit card rate from 10% to 18% in December despite perfect payment history.”

Last year, during a hearing on the Credit CARD Act, a representative from the National Credit Union Administration (NCCU) testified that credit unions, like commercial banks, will be under tremendous pressure if stricter regulations are imposed on credit cards.  In other words, profit margins for one of their most profitable products will shrink drastically.

Furthermore, credit unions have not been immune to the increasing number of delinquencies.  Fitch Ratings released more bad news about the credit card industry on Jan. 5: “Delinquent balances on U.S. credit cards reached record levels and defaults surged higher in December 2009.” To make matters worse, some credit unions with aggressive investment portfolios invested in exotic financial instruments based on subprime mortgages and have yet to recover.   

Unfortunately, it seems as if though there is no real refuge for those with revolving credit card debt. Though credit unions have interest rate caps and more consumer-friendly products, they still have the ability to raise interest rates and change terms within their limits. We now know that they are more willing to push customers closer to that limit. 

Has your credit union changed your terms or raised your interest rate? 

Comments

[KBT]

this is really scary... i hope my credit union doesn't go "rogue".