One of Municipal Credit Union's former neighbors expressed shock and sympathy about last week's arrests of hundreds of MCU members who stole money from the credit union in the wake of Sept. 11.
But the shock had more to do with how the situation came to be in the first place, not the fact that members would take advantage of Municipal while it was in the midst of "doing a good deed."
When the terrorist attacks brought down Municipal's communications with the ATM network NYCE, the credit union decided to allow members to withdrawal funds at its ATMs anyway, even though MCU didn't have a means of tracking whether those members had sufficient funds. Thousands of MCU members are alleged to have taken out more than $1,000 when they knew their accounts didn't have that much in them, hundreds allegedly took out more than $5,000 from accounts they knew didn't have the funds to cover the largesse (see related story, above).
"I don't understand why they didn't know that something like this would happen, and I don't understand how it could happen," said Linda McFaddon, COO of XCEL FCU, whose World Trade Center headquarters was destroyed on Sept. 11. "There are several safeguards that are built into the NYCE chain, and they must have gone in and lifted every single one of them."
But what McFaddon was most shocked about was that it took so long for Municipal to react to the situation. "NCUA requires that we have a disaster plan, and part of that plan is to have back-up tapes and a hot site. You take the tapes to the hot site, and you get back up and running. They should have been live with NYCE within a week," she asserted.
Help The Member-Help The CU?
Like Municipal, XCEL FCU faced many tough decisions about how to help members in the wake of the tragedy. "We had 14 ATMs in the New York metropolitan area, and they were either totally down or up and running normally. We decided not to charge any surcharge fee through Nov. 1, and we ate all of that," she explained. "There were a lot of things that we had to look at and say, 'OK, this will help the member, but does it have the potential of hurting the entire credit union?' There were some things that we wanted to do for our members during this tragedy that we simply couldn't do, or we found other ways to deal with it.
"It's my understanding that Municipal forgave all the loans (made to members who deceased in the Sept. 11 attacks). They're a much bigger credit union than we are, we simply couldn't afford to do that, even if we wanted to," McFaddon said of the $76.8-million XCEL. "We had 50 members who perished that day, and every single one of the loans that we had made to those members has been made good by the family, either through credit insurance, life insurance, etc. We didn't sustain a single loss. But we did try to help our members on a case-by-case basis. We had a woman come to us whose husband had been killed in the World Trade Center, and she couldn't get at the money from his paycheck because it went into an account that she didn't have access to. We couldn't simply give her access to that account, but we made her a loan to get her by until she could get access to that money. We found ways to help without hurting the credit union, because in the end, hurting the credit union hurts our members."
ATM De Ja Vu
Sadly, the one thing that didn't surprise McFaddon was that members took advantage of MCU when given the opportunity.
"Back in the early days of ATMs, we had to take our system down every night at midnight. Eventually, word got around that if you waited until midnight, you could get money out even if you didn't have money in your account, and we had people who, once a week, took advantage of that," she related. "But in those days, you could only take out $100 at a time, and we always got the money back. The point is, there's always someone who's ready to beat the system if given the chance."
When news first leaked out about the situation at Municipal, McFaddon told her staff to brace for the calls from members. "The radio station reported it but didn't name the credit union, so we knew it happened, but we didn't know which credit union it was-we just knew it wasn't us and we'd better be ready to tell our members that," she offered. "You can believe our board members were calling to make sure we hadn't done anything like that."
As the only credit union to have been headquartered inside one of the twin towers, XCEL knew its members might assume it was their credit union having all the trouble.
"I do feel for (Municipal)," McFaddon commented. "But I think there will be repercussions, repercussions for all of us. NCUA will step in and take a close look at what happened, and then there will be a whole new set of regulations."