Now the Association of British Credit Unions Limited (ABCUL) has welcomed the partial crackdown by the Office of Fair Trading (OFT) on the loan-finder industry.
It comes as credit unions embark on a £73 million modernisation that will help them fight the payday loan industry, and as bigger unions mount a serious challenge to the tarnished banks.
Citizens Advice says an astonishing 16 million cold calls a week were made by debt management firms in 2009, with loan fee scams affecting at least 110,000 people. Numbers are bound to rise further with an estimated six million households in arrears or struggling to cope.
The OFT will now require any upfront fees to be refunded if no loan is agreed, and the consumer to be informed of their right to a refund.
Many credit unions have reported enquiries from people who paid fees between £50 and £70 or more for a supposed “referral” – even though no credit union has any relationship with such companies.
ABCUL has welcomed the Government’s recent promise of up to £73m to continue the expansion of credit unions over the next four years, and its commitment to providing access to credit union accounts through the Post Office network.
Meanwhile, two of the UK’s biggest credit unions, Scotwest in Glasgow and Capital in Edinburgh, are demonstrating how bigger unions can take on the banks without post office assistance.
Capital Credit Union, with 17,000 members, started out serving public employees but in 2003 changed its “common bond” to a community credit union. It is the largest contractor in Scotland working with the Department for Work and Pensions to help people without a bank account access financial services.
Marlene Shiels, chief executive, said: “We are hopeful of new legislation which will give us more powers not only to promote more products and services and compete with the banks but also to work with small businesses and voluntary organisations for the first time.”
Credit unions want to be able to pay ongoing interest in the normal way, rather than have to wait until they have earned a surplus to be able to pay out a dividend. That will boost deposits from savers. Sheils said: “It is critical that the credit union is able to attract people from all walks of life as without those who can save and borrow, we cannot generate surpluses to help those most in need.”
Capital offers a full product range including mortgages, insurance and current accounts, and over the past two years has seen a strong rise in membership. However, Shiels is not keen on the Post Office tie-up. “We are trying to design our credit unions so that we don’t need to send our members to another institution.”
Rod Ashley, chief executive at Scotwest, agrees. He says smaller unions need help to avoid having to offer members more expensive services such as prepaid debit cards. “It is convenient and a useful alternative for someone who can’t get a current account, but I am slightly nervous that it comes back to the people having the most difficulty paying the highest prices.”
He adds: “If there is going to be a tie-up with the Post Office, are the members going to have to pay for it?” Ashley believes smaller community-based unions serving a few hundred members, may evolve to become satellite points for bigger operations which could offer a better service.
Scotwest opened in 1991 with one employee of Strathclyde council, and now has £40m of assets, 25,000 members and 30 staff. It works with 80 organisations across the west of Scotland, all of whom offer the credit union as part of their employee benefits package.
Ashley said: “There are a lot of people in credit unions now for whom it is the equivalent of a mainstream financial service.”
Amid reports that 100,000 Scots were resorting to payday loans to pay for Christmas, Scotwest last March launched a “fast 500” facility guaranteeing a quick loan with minimal checks at 26% interest (not the 4000% of payday loans), and loaned more than £300,000 to 650 people.
ScotWest and Capital are collaborating on a new IT system which Ashley says will be “industry standard and future-proof”, enabling better and more cost-effective service.
Ashley added: “We have to keep moving away from this image that we are the poor man’s alternative. Credit unions are mainstream and should be there for everybody.”
Free information at www.findyourcreditunion.co.uk, or ABCUL on 0161 832 3694
JOHN Seery (pictured) first joined a credit union when he worked at Edinburgh’s Telford College 25 years ago, and on his retirement six years ago he discovered Capital Credit Union was the closest to his new home in Stockbridge.
“The one thing I really like about it is it is very personal banking. When I go in to get cash, they always greet you by your first name – ‘how’s the family’ – which is more than you get in a bank. I have made a few friends with people going in at the same time.”
Seery is also a fan of the union’s borrowing rates, which he makes use of for a modest loan twice a year at summer and Christmas. He now banks nowhere else and says of Capital: “There are lots of good things about it.”