FoolProof Featured On AOL. The free FoolProof financial literacy programs offered by Educators CU were reviewed on March 9 by an AOL columnist. Here's the link to the story.
The government takes over two ‘corporate’ credit unions: Does this impact you and your relationship with Educators?
You may have heard that a big credit union in California and a big credit union in Kansas were taken over by the government on March 20th. I’m going to give you a rundown on what happened, but first wanted to answer this question: does this in any way impact your funds or services at Educators? It does not.
The two credit unions taken over by the government aren’t regular credit unions like this one. They don’t have individual members. They are two of the 28 “corporate” credit unions in America which provide services to other corporate credit unions, not to consumers.
There are 28 corporate credit unions. There are over 7500 credit unions providing services to consumers. Those 7500 credit unions are local businesses that operate pretty conservatively. The vast majority of them were never involved in the sub-prime mortgage debacle, and the vast majority are strong as an ox.
In fact, on the very day the credit union regulator announced the takeover of the two corporate credit unions, the regulator said this: “Credit unions that serve consumers remain very strong.” Not long before that, the Chairman of the House Financial Services Committee went even further: “If credit unions made all the mortgage loans, then there would have been no sub prime crisis and therefore no economic crisis.”
So, what happened? Like a lot of companies in the current economic downturn, these two corporate credit unions saw their investments decline in value. Incidentally, they weren’t bad investments, either. One of the most respected credit rating agencies (Fitch Ratings) said this about the Kansas credit union’s investments—just two days before the government stepped in. The investment portfolio “is of very high quality with almost 95% of the portfolio being comprised of AAA rated securities.” Triple-A securities are about as good as you can get.
So why did the government take over these two particular corporate credit unions? Not long ago, the government ran what’s called a ‘stress test’ on corporate credit unions to judge how strong they were. These two credit unions out of 28 weren’t judged as being strong. At that point, the government stepped in. The two credit unions are still providing the same services to credit unions, but with different management.
Now, let’s get back to you: is this something you have to worry about? It isn’t. Every account you have with this credit union is insured up to $250,000 by the government, and if you have multiple accounts, they’re insured, too.
If you have a lot of accounts or a lot of money in the credit union, you can determine exactly how much insurance you have by going to the “Insurance Estimator” link.
And while you’re going to other links, why not follow our link to the Wall Street Journal’s take on credit unions. This article ran on March 15th, and I think it will make you glad you’re a credit union member right now. The Wall Street Journal article is entitled "Safe Havens."
Trading-in or buying used? Avoid trouble - make sure old loan is paid off
Around the country, more dealerships are going broke and closing. This has created a big problem for some consumers who traded in a vehicle or who bought a used traded-in vehicle. The now closed dealership where they traded in or bought the used car closed and never paid off the lien (loan) on the car as they were legally supposed to do. What does that mean for the poor consumer?
- Those who traded in the car for a new car may find that if the dealer defaulted on paying the old loan, they must now pay it. They still owe their loan for the new vehicle, too.
- If the consumer has bought a used car on which the dealership didn’t pay off the old loan, this consumer may find that the lender of the previous loan repossess the vehicle or demands payment from them, the new owner.
How can you prevent this from happening to you if you're thinking of buying a used car or trading in your old car on a new one? Here are some tips:
- If you still owe money on your trade, pay it off yourself before trading. Having a clear title to the car prevents the above situation. By financing your used car purchase through your credit union, you’ll find that they can also help you pay off your existing loan. Instead of trading, why not sell your trade yourself? This IQ article shows you how.
- Ask to see the title of the car you plan to purchase. Make sure that the title is in the dealer's name and not the previous owner's name. Also, there should be no liens on the title (or clear evidence such as official receipts that previous liens are paid off). If the title isn't clear, look for another vehicle that has a clear title in the dealer’s name. If the dealer won’t show you the title or you have any doubts, go to another dealership.
Of course, before buying any car, read the IQ Car Buying Guide.