Who Regulates Lending Offers From Credit Unions


Most consumers never consider who it is that regulates their lending institutions. Not many average citizens are anxious to wade through and decipher all the acronyms and abbreviations that make up the alphabet soup used by government agencies at both the state and federal levels.

As far as Credit Unions are concerned, all Savings & Loans, Saving Banks, and State-chartered credit unions are regulated by a specific department known as the Division of Financial Services. Federal credit unions will generally have the term ‘federal’ or ‘federal association’ or initials like ‘F.A.’ or ‘F.S.L.A’ found in their name. Federal Savings Banks and Federal Savings & Loans are regulated by the OTS (Office of Thrift Supervision).

Because traditional financial institutions are creating more complex banking rules, while at the same time raising their rates on everyday services, many people are searching for different kinds of banking alternatives. Credit unions give them that.

A credit union is a nonprofit organization with 2 main goals. One is to offer easy-to-get services for a cheaper price. The other is to spread out those proceeds coming into their organization to its members. A credit unions customers are the ones who are participating in that credit union.

Being controlled by the members make a credit union a ‘cooperative’. It is also represented by its own board of directors. Members of a credit union are seen as being owners, which gives them the right to run for board positions and to vote. A credit union will consider ‘one member’ to be ‘one vote’, irregardless of their financial assets. As a board member, there is no financial compensation for their service.

The structure of a credit union is different than those for banks. They are nonprofit partnerships whose main goal is making money for its stockholders. The profits from credit unions are constantly being reinvested, which enables them to offer lower interest rates for their loans. Because they are nonprofit, they are exempt from most all state and federal taxes as well.

Credit unions are indeed nonprofit organizations, however, they are very carefully regulated. The NCUA (National Credit Union Administration), is a federal organization that independently regulates and insures members’ savings while regulating how the credit unions operate. They issue annual grades for each credit union. This yearly assessment is a reflection of a credit union’s management and fiscal health. The NCUA works very similar to the FDIC (Federal Deposit Insurance Corporation), and insures deposits as high as $250,000.

What makes credit unions stand apart from the traditional banks is the addition benefits it can give to its members. Those benefits include lower balance requirements, more competitive interest rates, less stringent loan requirements, and lower fees

Kyle Burton
Kyle is a contributing author who works for a number of financial portals in the online lending space. He has been covering the consumer loans and finance markets since 2006, his focus is to uncover topics that help borrowers get out of debt and save money daily. You can connect with him on Twitter, LinkedIN and Google+