May 23, 2019

A credit union is a type of financial cooperative that provides traditional banking services. They range in size from small, volunteer-only operations to large entities with thousands of participants spanning the country. 

For many years, credit unions have accorded their members an opportunity to save and invest their money. They can be formed by large corporations, organizations, and other entities for their employees and members. They are created, owned and operated by their participants. 

Understanding Credit Unions

The existence of credit unions in Fiji was enabled by the Credit Unions Act 1954. Credit unions follow a basic business model – members pool their money whereby they buy shares in the cooperative. This is done to ensure they are able to provide loans and other financial products and services to each other. Most times, income generated from credit unions is used to fund projects and services that will benefit the community and interests of its members. 

Requirements for credit union membership

Membership in a credit union is usually limited to people who share something in common. This includes working in the same industry or company, or living in the same community. To conduct business with a credit union you must become a member. This is usually done by opening an account with the union, usually for a nominal amount. 

After becoming a member, you become a partial owner. This means members participate in the union’s affairs and have a vote in determining the board of directors and decisions surrounding the functions of the union. A member’s voting ability is not based on how much money is in their account. They each get an equal vote. 

Withdrawal from credit unions

Section 43 of the Credit Union Act indicates that any member may withdraw from the credit union at any time on giving such notice of withdrawal as may be required by the by-laws. Upon withdrawal a member is entitled to refunds provided they have funds available after dues have been deducted as explained in Section 44 of the Act. 

More recently, however, the Council has received complaints from several consumers who were refused withdrawal and refund from several credit unions. 

Case Study 1 – Setareki had a few years ago taken a loan from the credit union he was a member of. Having been made aware that he had paid his dues he continued to make contributions to the Union as a means to save money. After a while he had opted to withdraw from the union and notified management accordingly. He was surprised however when he was informed by a member of management that refund of shares was only applicable to those who had retired or were deceased. For the latter, money would be provided to the deceased’s dependents. The Council mediated with Union management and referred them to Section 44 of the Credit Union Act which indicated that members who withdrew were entitled to refund should they have funds available after the payment of their dues.

Case Study 2 – Sangeeta had defaulted on her repayments with a banking institution and had committed to paying it off by a particular time frame. She was knowledgeable that her credit union contributions would be enough to offset her debt and thus gave notice for a withdrawal. While the union management had acknowledged and approved her withdrawal request they only provided her with partial refund with no reasoning as to why her funds were withheld. The Council negotiated on her behalf and she was able to receive full refund in time be able to pay off her debts with the bank. 

Council advice

The Council urges consumers to thoroughly research the credit unions they are a part of before signing a contract. Each credit union has by-laws and policies that govern their operations and these must be understood prior to joining. Some credit unions entice consumers with easy access to loans and other benefits, the Council therefore strongly urges consumers to carefully weigh their options before joining. 

Consumers facing issues with credit unions they are a part of are urged to lodge a complaint with the Consumer Council by calling toll free helpline 155. Alternatively they can email complaints@consumersfiji.org