How Credit Unions Can Protect Themselves From Staggered Contracts and Trickery
If you haven't reviewed your credit union's vendor technology agreements lately, perhaps you should. In recent years, many core providers have not only employed, but embraced a staggered contract strategy in a deliberate effort to entrap clients. Staggering contracts represent one of the credit union industry's most insidious little secrets receiving virtually no attention.
Nevertheless, given the velocity with which technology changes (think mobile banking), managerial prudence demands strict attention to the subject.
Paving the way to such a practice are the contracts themselves. Recently, credit union core processing agreements have exploded into lengthy documents filled with riddling language of contradiction and confusion.
In order to avoid the unpleasantness of getting stuck in an unwanted relationship is to first be aware that the practice of staggering contracts exists, and is furthermore, aggressively pursued by many credit union core processors.
The next step would be to follow a few simple rules to protect yourself.
- Surprise!! In For Another Five: Remove automatic renewal language. Such language does not benefit the credit union. If you are uncertain as to whether your present agreement possesses such language, find out. Most only require a simple letter of notification. However, be aware that most agreements require such notifications be sent one year prior to the termination date.
- We Regret to Inform You: Document your communications and insist upon confirmation. Some vendors may attempt to ignore any notification and often claim that they never received it.
- Good Morning Rip Van Winkle: Avoid signing long term agreements. Technology agreements beyond five years ignore the speed with which technology changes and the world in which we now live.
- You Signed What? Do not authorize any employee to sign an agreement absent internal review. Openly discuss the practice in management meetings. It will serve to explain why it is essential for the credit union to maintain a unified contractual policy.
- Align Your Planets: Make your position of syncing contracts clear to your legal council. As stated, many of today's agreements are long and confusing. They often appear to say one thing only to be overridden by that of another service agreement. Insist that any and all language involving the term of respective services are carefully reviewed and synchronized.
Choose a CU Vendor Partner you Can Trust
You've heard the saying "trust your gut." If your gut instinct is making you nervous or leary of a vendor, there is sometimes very good reason. It always makes sense to involve others from your organization and discuss openly any concerns you may have. Choosing a partner you can trust in your Credit Union Core Processor is key. Read our blog article "A Common Sense Approach to Credit Union Core Processing Reviews" for more advice on this matter.
FLEX is regarded by credit union industry personnel as the first among competing vendors for customer satisfaction, due in part to our integrity and honesty.