The recent closure of 35 credit unions in Rhode Island, the deposits of which were privately insured, has created some concerns among Utah's 814,000 credit union members that the same problems affecting those depositors might happen here.
Not to worry, assures David Adams, president of the Utah League of Credit Unions.All of the accounts in Utah's 167 credit unions , said Adams, are insured up to $100,000 by the National Credit Union Share Insurance Fund which is administered by the National Credit Union Corp., a federal agency.
The problems in Rhode Island, said Adams, "are another example of the inability of private deposit insurers to adequately regulate their insured institutions and shore up public confidence during a crisis."
The Rhode Island credit unions were insured by the Rhode Island Share and Deposit Insurance Corp., a private company. Twenty-two of the 35 immediately qualified for federal insurance.
But Utah credit unions have more than just federal insurance, said Adams. Utah's economy is still relatively strong, particularly compared to northeastern states such as Rhode Island, and Utah also has a strong state regulator. Also, he said, Utah credit unions focus almost exclusively on consumer financial services, not riskier commercial loans.
"Consumer loans are much smaller and are spread out over many more individual borrowers, making the effect of recession and loan defaults less severe on credit union operations."