Can a Credit Union do this legally?

[dkNY]

Hi. I am new here and asking this question on behalf of a friend. I will try to keep it short and simple for this one. (the posts about my own problems may not be, HA!)



After the bankruptcy was discharged in NY state 4 years ago, my friend went to the local credit union for a 2k personal loan. That CREDIT UNION (CU has different laws than banks) was named in the Bk and the debt was SETTLED, but not in full. The loan officer explained that the loan would be no problem, but the balance of the discharged debt had to be paid off first. My friend explained that if she had the 48k for that, why would she sit here and ask to borrow 2k?

Is this LEGAL? Couldn't they of come up with an excuse to decline the credit if they felt this way? My first thought would be to get this in writing and have it on file if nothing else should this bank make any further attempts to collect the debt, directly or indirectly. Wouldn't they of already wrote this off once? I will admit it took guts to go in that bank and apply for credit, but it seems like they should not be asking for repayment on a discharged debt.

Sorry if this was already discussed in a previous thread or if i posted in the wrong place. I just discovered this forum and already am learning a lot.

[busbis]

At most credit unions if you have created a loss in the past, regardless of when they can deny any services to you. I worked for a cu for over 15 years and we would explain to the members that there was no obligation to repay the debt (if discharged), but in order to obtain any new services it would have to be paid. NCUA would always look to see if new loans were created to pay off old credit union debt.

[cj0203]

Yeah, I've heard of this. Your friend probably needs to try another bank or CU.

[LadynRed]

but in order to obtain any new services it would have to be paid.

And that would be ILLEGAL ! They can not EVER demand payment on a discharged debt, no matter what the reason.

CU's have this nasty clause called cross-collateralization that they use to force payment, but this doesn't sound like the case here.

Your friend needs to go somewhere else.

[tay666]

And that would be ILLEGAL ! They can not EVER demand payment on a discharged debt, no matter what the reason.

Actually it isn't illegal.
They are not trying to collect on a discharged debt.
They are stating a fact.
If you don't pay back what they lost on you the first time, they will not do any new business with you.
Most CUs work like this.
So do a lot of doctors / dentists.
If you have debts with them discharged in BK, they will drop you as a patient.
That is why a lot of people go ahead and contue to pay on their debts with doctors even after they are discharged in a BK.

[LadynRed]

Yes, they can refuse you services, but they absolutely cannot demand payment on the discharged debts.

[whywhywhy]

This is how things were at the credit union I worked at as well. It applied in any loss situation. However, since all accounts were closed and membership terminated during a bankruptcy or charge off situation, we were denying membership, not the product itself. Most credit unions now are very member hungry. Like others have said, just go somewhere else.

[CindyLou]

I agree with tay....I don't think they demanded payment. The person was free to either pay the BK'd debt and get the loan....or not pay the debt and not take the loan.

Anyone can deny you credit for any reason as long as it is not in relation to race, national origin, and all the other protected categories.

[dkNY]

Thanks so much for the great and thought out answers. The part about not taking the loan is a no brainer in this case, HA! It just bugs me that they must of wrote this loss of years ago, but now they want it back. I guess this money would be what they use to pass around as bonuses and pay the open bar tab at the holiday party. (just kidding).

I have another Cu banking question to post and hopefully it is answered by people as nice as all of you, since it involves some ethics.