Feds close North Philadelphia credit union

Federal officials shut down Borinquen Federal Credit Union on July 8 after a $2 million second-quarter loss wiped out the organization's net worth and left it with a $1 million deficit.

The sudden closure of Borinquen, founded in 1974 to serve low-income Hispanics in North Philadelphia, upset community leaders, who said they did not understand why the National Credit Union Administration acted so quickly after taking control of Borinquen on June 24.

"I think the death penalty was an extreme sentence," Will Gonzalez, executive director of Ceiba, a coalition of Latino community-based organizations in Philadelphia, said Wednesday at a meeting to help Borinquen members open accounts at other financial institutions.

Irene Rivera, who opened a savings account at Borinquen in 2004 but also banks at PNC, said the credit union was popular as a "neighborhood place people could walk to. Because a lot of people didn't know English, it was convenient to them."

Borinquen, started by Casa del Carmen, a Catholic social service organization, had 7,624 members with $6.2 million in deposits on June 30, according to financial statements on the credit union adminstration's web site.

It is not clear what led to the failure, which is the fourth by a financial institution in the Philadelphia region since September.

The credit union adminstration, which insures savings at credit unions, as the Federal Deposit Insurance Corp. does at banks, on June 6 ordered Borinquen to hire an accounting firm to perform an audit and reconcile cash and bank accounts.

"This is based on serious and persisant record-keeping problems and the failure to perform or obtain an annual audit," the order said.

The biggest difference between Borinquen's financials from March 31 and June 30 is a $1.44 million decline in cash and investments. The link between that decline and the quarter's $2 million "miscellaneous operating expense" is not clear.

Loans outstanding were stable at about $3.4 million. Deposits increased by $561,277.

Borinquen's general manager, Ignacio I. Morales, could not be reached for comment. Calls to the credit union, in a former Wachovia branch at the intersection of Front Street and Allegheny Avenue, are being routed to a credit-union administration center, which is distributing deposits to former members.

No one on Borinquen's seven-member board could be reached.

Patricia DeCarlo, executive director of the Norris Square Civic Association and one of the community leaders who helped revive Borinquen after a brief shutdown in 1986, said she was upset by the closure "because I know some of those members and know they are people who don't feel comfortable with banking, don't trust banking, don't speak the language very well," referring to English.

Angel Ramos, another Borinquen member who also banks elsewhere, has no difficulty with English, but he said he liked Borinquen. "They always treat you good, nice," he said.