Are there risks with your credit union?

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Linda Allen/Consumer Reporter

Indianapolis, Sept. 29 - The government recently released a 57-page report. In the study the General Accounting Office secretly inspected privately insured credit unions in eight states, including Indiana.

The mission was to learn who was following regulations and who was breaking the law.

The study raises an important question for consumers.

"You know, I'm getting older and I need to know that when I am ready to retire my money will be there." Rosalie Stringer knows who insures her deposits, unfortunately, many consumers don't.

"They just assume it is there and that it's a federally insured institution." Finance Specialist Dr. Ken Carow says consumers need to know how their money is insured and they need to be aware of the risks.

By law, all banks are federally insured. If the bank goes out of business, the government steps in to financially bail them out. For the most part, your deposits are completley safe.

While 98 percent of credit unions nationwide are federally insured, a small number have private insurance. That means if the company that privately insures their deposits has massive economic problems, it could put your money at risk.

Carow asks,"If there are a large number of failures in the industry, would the private insurance fund be able to bail out all depositors?"

According to the data, there are 20 privately insured credit unions in Indiana.

Research we've uncovered in the General Accounting Office Report claims some of the institutions are breaking the "disclosure rules."

Some credit unions do a good job of complying with the law. Their disclosure, letting customers know their deposits are privately insured, is highly visible. But According the GAO report, at some credit unions consumers don't know the financial risks because the disclosure can't be found.

Richard Hillman is with the GAO. "It's that notion of making sure they are aware. It's not that it is wrong to be associated with a credit union that's privately insured, but there is a risk associated with that and the federal government would like to make sure that consumers are aware of that risk."

Other financial experts agree, privately insured credit unions are relatively safe. Most believe it would take something of catastrophic proportions to put your funds at risk.

If you're selecting a new financial institution, consider all risks.

Then, as always, shop for the best buys.

"Call up the bank. Call up the credit union," says Carow. "See which one gives you a higher rate. You'll find that rates vary quite substantially between different banks and different credit unions and if you just assume that, 'Hey, they all offer the same rate,' you're making a mistake."

Congress requested the report after a large California credit union switched to a private insurance group. With assets of $3 billion, if the credit union went under it could pull everyone down with it.

The GAO won't release the information about which Indiana credit unions weren't following regulations, but says the credit unions will be notified and possibly penalized. If you have concerns, talk with someone at your financial institution.