Credit Union News

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A code of governance for credit unions in Britain was officially launched at ABCUL's recent autumn conference.

The latest ABCUL Newsletter includes information about the forthcoming Northern Financial Inclusion Conference to be held in Liverpool on 4th December 2008. The theme of the conference is 'Eye on the Future: Financial Inclusion...Yesterday,Today and Tomorrow'.

ABCUL is teaming up with national money advice charity Credit Action and Cattles plc at this year’s party conferences to discuss if the withdrawal of credit products and the tightening of borrowing criteria by mainstream lenders may be making affordable credit less accessible

The Times (28 Aug o8) reports:

Credit unions, which offer savings and loans to local communities, are to be reformed next year to encourage more people to use them. 

The Government wants to make it easier for low-income households, particularly those on benefits and with bad credit records, to obtain loans so that people are not forced to turn to expensive credit cards or even loan sharks.

Credit unions are financial cooperatives owned and controlled by their members. The members are joined by a “common bond” - they may live in the same area or go to the same church. Though most unions offer good-value loans, as well as current accounts and free life insurance, they have, until now, been unable to pay any interest on savings.

Now the Government wants to scrap the “common bond” aspect of membership and allow more disparate groups to join together to form a union. It also wants to allow unions to pay interest on savings, allowing them to compete directly with banks and building societies. The proposals are due to come into effect in October next year.

There are more than 400 credit unions in Britain, providing financial services to about 400,000 members. The unions are regulated by the Financial Services Authority and covered by the Financial Services Compensation Scheme, which guarantees the first £35,000 of a member's savings if a union go bust.

A key aim of credit unions is to foster financial inclusion, by providing financial services to people who may be refused loans, or even current accounts, by mainstream providers. However, there is nothing to stop people with perfect credit records from taking advantage of a union's good deals and flexibility.

Lakshman Chandrasekera, chief executive of Southwark Credit Union, says: “Increasingly, banks are unwilling to do business with unprofitable customers. A person on benefits might not generate any income for banks and will find it hard to get a current account. Consequently, many people simply withdraw their benefits in cash and spend the money. For a charge of 95p a week to cover our costs, we give members a current account and a debit card, which allows them greater choice and control of how they spend their money.”

To find out about your local credit union, go to http://www.abcul.coop.

As part of the Competition Commissions remedy on lack of competitiveness in the home credit market, a new website has been launched on 1st August 2008 called LendersCompared.org.uk. which allows you to compare all home collected loans available in your area.  

To access the site please click here.

Birmingham  City  Council is leading the way in a campaign aimed at
raising the  profile  of  community  credit  unions  for  those who
struggle to get mainstream loans.

The Financial Inclusion Partnership, led by the city council and
comprising housing associations, Citizens Advice Bureau, credit unions,
Department for Work  and  Pensions  and  other partners, is running the
campaign alongside BRMB.

Launching  on  Monday,  it  will  encourage people to text a message to
the radio station. Messages will then be passed onto the partnership
which will be  able  to  offer  appropriate  advice and put people in
touch with their local credit union.

Jacqui   Kennedy,  the  council  lead  on  financial  inclusion,
alongside Councillor Ayoub Khan, said: "We're starting this campaign now because soon people will start to think about Christmas and how they will be
able to pay for presents.

"To  get  a loan from a credit union you have to have been saving with
them for  a  minimum  of  13 weeks so it's important people start
thinking about this  now.  They  offer  competitive rates of interest
and accept low-level savings for those who just want to put away a small
amount.

"We  also  want  to show that credit unions are an important alternative
to mainstream  loan  companies,  particularly  for  people who struggle
to get credit from high street banks and building societies and may
otherwise fall into debt or become victims of loan sharks."

Those  interested  should text 'credit' and their postcode to 81156 and
the campaign will run for two weeks on BRMB.

For further information on the Financial Inclusion Partnership visit www.birmingham.gov.uk/financialinclusion

To view the latest edition of the ABCUL Newsletter click here

Social Enterprise Magazine reports the following:

Social lenders have been heralded by a government minister as the way to prevent future calamities like that of Farepak happening again.
Minister for financial inclusion James Plaskitt was set to make the claim at the Community Development Finance Association's Money for Change annual conference being held in Leeds today.

Farepak was a Christmas hamper and voucher scheme that saw up to 150,000 low income earners ‘save' with the firm over the year and have their money come back to them in the form of Christmas goodies in December. Most of Farepak's customers were low income earners recruited into the scheme by their friends and many were unbanked.
When the firm collapsed, some lost their savings completely for that year and many were sent into a spiral of loan-shark debt simply because they chose to give their families some treats at Christmas in 2006.

Plaskitt said he wanted ‘high performing CDFIs to look at ways of extending their reach, offer banking services, promote safe saving and offer basic insurance products'.
He said: ‘We want to build the capacity of the third sector lenders in order to increase their reach and efficiency and scale. The overall aim is to bring about the financial inclusion of over three million adults in the population who are currently excluded or in danger of being excluded.

‘We want to make sure we don't see examples of problems such as those suffered by Farepak savers happen again.'

The CDFA's CEO Bernie Morgan planned to tell the 200 delegates that professionalisation was the way to realise the minister's target. Referring to the conference theme of ‘evolution or revolution', she said: ‘We can not afford the distraction and destruction of a revolution. We must develop our services on a smooth trajectory of evolution.'

Money matters were high on the agenda when representatives from credit unions from across the country met at Blackburn House in Liverpool last week. 

Finance minister and MP for Wavertree, Jane Kennedy voiced her support for affordable finance options for those on lower incomes, ahead of the Treasury’s official announcement this week on relaxing the rules relating to credit unions.  The reforms, to be introduced next year, should make it easier for low-income families to get affordable loans.

The Riverside Group – one of the country’s leading social and regeneration organisations led the event to celebrate securing cash awards from Abbey of £30,000 to help combat financial exclusion for tenants and residents across the country. The Riverside Group donated awards worth between £1,500 and £3,000 to credit unions in Merseyside, Newcastle, Carlisle, Cheshire and Lancashire to promote their services to many more people.  Riverside also launched a toolkit to help organisations communicate with those suffering financial exclusion.

Laura Bostock regeneration officer for The Riverside Group said:  “It was good to hear about the different ways that credit unions are reaching people to help combat greater poverty.  The credit crunch not only has an impact on homebuyers.  Those who live in the most deprived areas with no access to mainstream financial services are finding the trap of the spiral of debt even more difficult to escape.  Many already pay much more for credit, services and fuel, and as a result are ever more reliant on illegal loan sharks and expensive door step lenders.”  

One of the innovative schemes taken up by Liverpool’s Lodge Lane Credit Union is targeting young people, who can find the lure of credit difficult to resist despite high interest rates.  Other credit unions are doing outreach work with partner organisations and the introducing mobile services to allow people to deposit savings at a variety of venues.   

Representatives from credit unions welcomed the government’s plans to remove the red tape from the sector.  This will include changing the rules of the Common Bond – which means that in order to access loans members must either live or work in the same place.

Jane Kennedy, MP added: “The Labour Government  has long recognised the importance of the role that credit unions play in helping people to manage on very low incomes without getting into serious debt. The government wants to see the growth of credit unions.   Plans to update legislation will mean more flexibility and allow credit unions to compete with mainstream financial services.  Many people are driven to use more expensive options to access credit including illegal loan sharks.

The July edition of ABCUL newsletter contains information relating to the first meeting on Monday 30 June of a new All Party Parliamentary Group on Credit Unions. Kitty Ussher MP, Economic Secretary to the Treasury, spoke at a reception to mark the launch of the group.  To read more and other credit union articles click here 

The Treasury will announce later that it is to relax the rules governing credit unions - community-based savings and loans organisations. It is designed to help people who are having trouble either repaying debts or obtaining loans from other lenders.
Ministers fear such people could become easy prey for loan sharks.
Credit unions work as low-risk savings and loans providers, frequently for less well-off customers.
Common bond
The move comes amid concerns such customers may be particularly badly hit by the credit crunch, such as by finding it increasingly difficult to borrow money from traditional High Street lenders.
Although any area or organisation can form a credit union, they have to operate within their own communities - known as the Common Bond.
The Treasury plans measures to broaden the Common Bond, allowing the sector to expand.
By this time next year, ministers hope to get rid of many restrictions on who credit unions can lend to, allowing them to branch out by forming alliances with other unions, employers and housing associations.
They hope that by doing this, people will be able to access cheap, secure loans which they will be able to repay.

A great item was run on the popular BBC1 programme The One Show, at 7pm on 7^th April 2008.  Dom Littlewood investigates borrowing money from a credit union, and finds out how this works differently from a loan shark.

To view the extract from the One Show via BBC website click here.

The April edition of ABCUL newsletter contains information relating to the new Bristol Credit Union office which was opened by Work and Pensions Minister, James Plaskitt. To read more and other credit union articles click here.

The City of Brighton & Hove Credit Union has been given authorisation by the Financial Services Authority to extend its services into the rest of East Sussex. The newly formed East Sussex Credit Union is now planning to run an outreach service in and around the Wealden area.
 
Credit unions seek to promote a culture of saving - especially amongst low income households. We also provide affordable credit to many people who currently may have to use high cost lenders that often charge more than 400% APR. All of our loans are linked to savings incentives that have encouraged our members to invest £1/2m in our organisation.
 
You can find out more about the credit union by visiting our website at www.credit-union.org.uk and can browse to the news items to read our latest members’ newsletter.
 
We have some ideas to discuss about how we would like to run a service and are looking for people with local knowledge to help us shape these plans and put them into practice.
 
So if you are living or working in the Wealden area we would therefore like to take this opportunity to invite you to an action planning meeting which is due to take place atCrowborough Town Hall on Thursday 14th February from 10.30am – midday.
 
If you would like to attend the event or want to find out more please email adrian.davies@credit-union.org.uk.
 

This is Cheshire January 13, 2008 reports a scheme  to help people get out of debt and save money has been a booming success in Winsford.
Cheshire Neighbours Credit Union opened an office in the town centre in Otober and hundreds of people have taken advantage.

The Credit Union is a not-for-profit organisation and will lend money only to people who can afford to pay it back.  Volunteer Mike Kennedy said: "It has been incredible how popular it has been in Winsford.

The Credit Union is regulated in the same way as banks and building societies and provides an alternative to doorstep lenders and credit cards which could plunge people further into debt.

Mke said: "The Credit Union means people will not be getting ripped off because the interest is so low. "It is just a fantastic idea because there are no hidden snags and because it is not for profit you know you are getting the best deal you can. "It is also great that you get life insurance so I know that if anything happens to me then my family will be given financial support."

The Credit Union is at The Junction and is open between 10am and 1pm on Tuesdays, 10am to 3pm on Thursdays.
For more information call 01606 598041.

Christmas is over for another year, the decorations and cards have been taken down, and life can get back to normal.  However, millions of us are still paying for the cost of Christmas 2006 and the credit card bills are still to drop through our letterboxes for 2007.  Why not start to prepare for next Christmas now by opening a credit union Christmas savings account?  If you start planning for Christmas 2008 now, you could easily save up several hundred pounds without having to resort to credit or loans.

Anyone in West Lothian can join at least one of the three credit unions operating in the area, and it is easy to set up an account to put away as little as £5 a month.  There are several different ways to pay in, including cash or standing order/direct debit, and you are encouraged to save small amounts regularly.  If you find that you need some extra money, the credit union may be able to help you out with a low-interest loan, and you can still continue saving with the credit union while you repay the loan.

Your money is protected in a credit union as it would be in a bank or building society – in the unlikely event that the credit union folded, you would receive all your money back up to £35,000.  And, for most people, your savings and loans are covered by free life insurance.

Liam Murphy, chairman of West Lothian Credit Union Forum, says: “Make a positive start to the year by planning and saving with the credit union for those big events in 2008 - a holiday, wedding, Christmas. Many of our members tell us they had no savings until they joined their credit union.”