Compliance

Beware of Casual Conversation with Members

In certain situations, friendly banter can put your CU at risk.

July 29, 2014
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A cornerstone of credit unions’ excellent service is understanding members’ goals and needs and showing members you care. This is what sets credit unions apart from other financial institutions.

But without proper controls and training, being too friendly can be dangerous to your credit union’s health.

subscribefrontlineLet me paint a picture that could put your credit union in jeopardy. It’s a scenario that plays out every day in credit union loan offices. Here, two members sit in front of a loan officer’s desk. One borrower has applied for a credit card.

Loan Officer: “Well, I have your loan application for a credit card account.”

Member: “I’m so excited. This will be the first credit card account I’ve had by myself.”

(The loan officer notices a wedding ring.)

Loan Officer: “And I see you’re married?”

Member: “Yes. We got married three weeks ago. We had a great honeymoon. It was fun to go back home.”

Loan Officer: “Nice. Where are you from?”

Member: “Finland. It was the first time I’ve been home in a while.”

Loan Officer: “I’ve never been there, but I’ve heard it’s beautiful.”

Member: “It is. Helsinki is magical in the summer.”

The loan officer reviews the loan application and the members don’t qualify. The loan officer informs them and provides the required adverse action notice.

Two weeks later, the members sue both the credit union and the loan officer. They allege the credit union violated their rights under Regulation B and the Equal Credit Opportunity Act.

Now, review the dialogue above. Can you see any problems? Friendly banter has put your credit union at risk.

Here’s how: The disappointed member recalls talking about getting a credit card with the loan officer, but also remembers the loan officer asked about their wedding and honeymoon in Finland, and where the borrower was from. The next stop the members make is the lawyer’s office. Why? They fear the loan officer discriminated against her based on her marital status and national origin.

Does the credit union have anything to fear? It was, after all, innocent “happy talk.”

Yes, the credit union is at risk.

The credit union very well might win a case (case law says merely asking about the origin of an unusual surname isn’t discriminatory, for instance). But a lawsuit will be expensive, and might show a pattern of denials in similar circumstances that you can’t explain by anything other than discriminatory intent.

In addition, this could provide very bad publicity for the credit union—and will be bad for staff morale.

How do you avoid potential liability? Avoid discussing certain topics, such as:

  • Age: “How long have you been out of school?”;
  • Marital status: “When did you get married?” “When is your divorce final?”);
  • National origin (“Where are you from?”); and
  • Gender (“Wow! I don’t meet many male nurses!”).

Staff training must emphasize techniques to steer conversations away from these topics. Also:

  • Learn to identify signs that a conversation with a member is heading off-track in ways that could endanger the credit union;
  • Identify and report to compliance staff and credit union management any situations that might be troublesome; and
  • Practice these types of scenarios to find the proper balance between getting to know members and keeping your credit union out of danger.

BILL KLEWIN, Esq., is the director of regulatory compliance for CUNA Mutual Group.


This article first appeared in Credit Union Front Line Newsletter, the monthly sales and service newsletter for branch staff and their managers. Subscribe now to the print edition or PDF version.

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