What Are Credit Unions?
A credit union is a cooperative financial institution that is owned by its members. Most credit unions offer financial services that are similar to those offered by banks. For example, you can likely open a chequing or savings account at a credit union. You also have access to loans and credit services as well as many other financial services, such as credit or debit cards, depending on the particular credit union.
One major difference between credit unions and banks is that credit unions are not-for-profit organizations. This means that the money that is made by a credit union is used for the operations of the union and for the benefits of its members.
However, credit unions may also have fewer physical locations and ABM machines, depending on where you live and the credit union in question.
Joining a Credit Union
There are certain membership requirements to join a credit union, depending on the credit union. This is because credit unions were originally designed to serve specific segments of the community. Therefore, to join a credit union, you may need to have a specific occupation, live in a certain geographical area, or work for a certain company. The credit union will let you know what requirements it has.
A credit union will also likely require that you purchase “shares” in the union or pay a membership fee to join. Again, the specifics will depend on the institution.
How Credit Unions are Regulated
Most credit unions are regulated at the provincial and territorial level. However, some are federally regulated.
This means that credit unions are required to follow many similar regulations to those of banks. For example, eligible deposits are protected. This means that deposits in Canadian currency that are made into chequing and savings accounts (as well as some other types of accounts) are insured. The result is that you are protected up to a certain amount if the credit union fails. The amount that is protected varies by province and the type of account.
Since most credit unions are regulated at the provincial and territorial level, the rules that must be followed and your rights will vary depending on where you live. For example, in Ontario, credit unions are regulated by the provincial Ministry of Finance, the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO).
The Ministry of Finance is responsible for proposing and developing the laws, the Superintendent of Financial Services is responsible for ensuring that credit unions act in accordance with regulations, FSCO deals with incorporating credit unions and approving changes under their charters, and DICO handles solvency rules and provides deposit insurance protection.
While this seems complex, the reality is that credit unions are regulated and thus they must follow certain rules and regulations. This mean you have rights when you join a credit union.
How to Check if a Credit Union is Registered
In Ontario, the Financial Services Commission of Ontario maintains a listing of all credit unions that are currently registered in the province. Other provinces and territories will have similar lists. Before you agree to work with a credit union, you should make certain that the credit union is registered and that a federal or provincial agency is providing deposit insurance to the union.
Resolving Complaints with Credit Unions
If you have a complaint regarding the performance or business practices of a credit union that you are unable to resolve by communicating with the credit union itself, contact the federal or provincial agency that regulates and overseas your credit union.
Credit Union Financial Statements
You should be able to get a copy of your credit union’s most recently-audited financial statement by requesting it from the credit union of which you are a member. Some, but not all, credit unions post their financial statements and annual reports on their websites.
In June 2017, the federal Office of the Superintendent of Financial Institutions (OSFI) issued a statement that set restrictions on the use of the words “bank”, “banker” and “banking” for financial institutions. This means that non-banking financial institutions such as credit unions will no longer be able to use these terms.
While this means that credit unions may not be able to advertise that they offer “banking” services, this will likely not change the services that they provide.