CCUL Headlines: Compliance

Case Review: CU policy wins out in bankruptcy court case

Wednesday, January 24, 2018   (0 Comments)
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Illustration not based on actual events.

In life there are some lessons that you learn by doing while others you can learn through another person’s experience. The latter rings true when reviewing court cases that other credit unions have gone through.

In a recent blog post by Nexsen Pruet’s Ron Jones, he reviews a case out of a New York Bankruptcy Court that highlights the importance of having a strong credit union policy. In summary, the case reads: A debtor was discharged under a Chapter 7 bankruptcy and when he went to try and reopen his accounts at the credit union, the credit union stated per its policy the debtor could not reopen his account.

The credit union’s policy explained that any member who causes a loss to the credit union must repay the debts in order to reestablish his or her accounts. The court found that the credit union did not act improperly, or coerce or harass the debtor, just simply informed them of their policy.

The three key takeaways according to Jones include: (1) make sure your credit union’s written policy clearly states the protocol for a member trying to reopen their account(s) with an existing debt; (2)  that policy should also be uniformly applied to all account debtors, regardless of bankruptcy; and (3) if the debtor/ borrower wants to voluntarily repay the old debt in order to activate a new account, explain how that may be possible within your policy.

Even though this case is in a different jurisdiction, it does provide precedent. For more information about this case, read the full article here. Should your credit union be interested, the Carolinas Credit Union League Compliance Department does offer policy review services. To request a policy review, contact CCUL Compliance at

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