People helping people is one of the credit union industry's favorite slogans.
But that doesn't mean helping deadbeats - at least not at some credit unions.
According to industry sources, a growing number of credit unions expel members who have defaulted on loans, racked up large sums in unpaid fees, or declared bankruptcy and made no plans for repayment.
"We're a financial cooperative, and members that cause the general membership a loss should not be allowed to enjoy the benefits of our services," said Richard Murray, president and chief executive of IAG Federal Credit Union, Rye, N.Y. "But expulsion does not end their obligation to the credit union."
IAG Federal has had the practice in place for four years. Mr. Murray estimates that 60 credit unions, mostly larger ones, have similar programs.
Once each quarter, the $541.2 million-asset institution sends voting members a list of people who owe $100 or more and refuse to pay or work out a payment plan. The membership then votes whether to banish the deadbeats. Between 40 and 60 members get the boot at each meeting, Mr. Murray said.
The threat of expulsion has scared some members into paying up, he added.
"If you're defaulting on a loan at the credit union, you might not want your co-worker or colleague to know that," he said.
Visions Federal Credit Union, Endicott, N.Y., began expelling deadbeats in June, said president and chief executive Frank Berrish.
"Membership should be a privilege," he said. The credit union kicks out anyone who owes $250 or more.
Citizens Equity Federal Credit Union, Peoria, Ill., is deciding whether to start such a program next year, said chief executive John Siefken.
"We're not pushovers," he said.
