Policy Briefing - issues for credit unions
Legislative Reform
Following a three year consultation process, a Legislative Reform Order has been passed by Parliament (on 8 November). Changes to the Credit Unions Act 1979 will allow credit unions to:
- Reach out to more people by extending membership to new groups – as a credit union will no longer have to prove that everyone who can join the credit union has something in common
- Provide services to community groups, social enterprises and businesses, not just individuals
- Choose to pay interest on savings, instead of a dividend
Credit unions are already working with partners such as housing providers and employers to extend membership to new groups of individuals when legislation allows.
Credit Union Back Office
In 2009, ABCUL received funding from Barclays to start helping its members collaborate on key aspects of their operations.
A back office for the credit union sector (as has been shown around the world) can bring:
- economies of scale to credit union operations
- higher standards and consistency in the delivery of key services
- crucially, the requisite infrastructure for a tie-in with the Post Office, making credit union services available throughout the 11,500 branch network
A full, integrated back office system depends on securing further funding. It has the potential to bring affordable credit and inclusive financial services to millions more people.
In March 2011, the Coalition Government earmarked £73 million for a credit union modernisation and expansion fund. ABCUL proposes to use a proportion of this to develop the back office. Feasibility studies are ongoing to determine whether and how the £73 million will be invested.
Credit Union Current Account
The Credit Union Current Account is operated in conjunction with The Co-operative Bank and is available in 25 credit unions. More credit unions will be launching the product in the future.
More than 30,000 credit union members have an account which comes with a VISA Debit card / ATM card and direct debit facilities – a great step forward in the credit union product offering.
Volunteer Hub
ABCUL are working towards launching a web facility which would match potential volunteers with credit unions who have volunteer opportunities available. We are in discussions with the banking industry to supply skilled banking professionals both to lend their expertise to credit unions via the hub and to gain a valuable and fresh perspective on financial services. All credit union operations are overseen by volunteer Boards of Directors drawn from and elected by their membership.
Credit unions and the Post Office network
ABCUL and Post Office Ltd have been discussing for some time how credit union services could be made available through the Post Office network. A back office for the credit union sector would allow this to happen.
This link-up would mean the following:
- Consumers could walk into any one of the 11,500 Post Office branches and join their credit union and/or carry out a wide range of transactions in real time.
- Post Office staff would be able to view details of a credit union member’s account, check balances, accept and pay out savings and forward information and requests to the credit union.
- Where appropriate, Post Office staff could provide instant responsible loans. Credit union staff could pre-approve very small lines of credit (£30-£400) that were affordable and convenient.
- This would provide real competition to the high cost credit market which currently takes hundreds of millions of pounds in interest from those on lower incomes.
- Credit union membership would rise from 860,000 to 3 million over 5 years.
- Cautious estimates demonstrate that 1.4 million new loans in a five year period would save consumers £336 million in interest payments over five years and 1 million people would be ‘nudged’ to begin saving some of the saved interest payments.
- This would also greatly increase access to safe savings, affordable insurance, budgeting advice and fair banking.
Such a scheme would greatly increase competition and diversity in financial services, bolster revenues for the Post Office and dramatically improve the financial well being of millions.
For further information on these or any other issues regarding credit unions please contact ABCUL’s Policy Team at enquiries@abcul.org
