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B6 – CREDIT WHERE IT’S DUE

B6 – CREDIT WHERE IT’S DUE. FRANK McKILLOP , ABCUL. 11 September 2013 TPAS South Conference. CREDIT UNIONS IN BRITAIN. ALTERNATIVES TO HIGH COST CREDIT?. CHALLENGES OF WELFARE REFORM. A financial co-operative owned and controlled by members. Membership

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B6 – CREDIT WHERE IT’S DUE

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  1. B6 – CREDIT WHERE IT’S DUE FRANK McKILLOP, ABCUL 11 September 2013 TPAS South Conference

  2. CREDIT UNIONS IN BRITAIN ALTERNATIVES TO HIGH COST CREDIT? CHALLENGES OF WELFARE REFORM

  3. A financial co-operative owned and controlled by members Membership determined by a ‘common bond’ - residence, employment or association What is acredit union? Loans and savings plus newer products like pre-paid debit cards, current accounts and mortgages. Credit union ethos Providing services to people – not making money from them

  4. What is ABCUL? • Association of British Credit Unions Limited (ABCUL) • A co-operative owned, funded and democratically controlled by its member credit unions • Over 70% of credit unions in Scotland, England and Wales choose to join ABCUL ABCUL President Sharon Angus-Crawshaw

  5. What is ABCUL? • ABCUL provides: • Representation • Information and guidance • Training • Conferences • Networking • Collective buying • Collective vision and leadership ABCUL Chief Executive Mark Lyonette

  6. Credit unions in Britain 1.04 million members Including 121,000 juniors 390 credit unions £807m in savings £605m out on loan

  7. Products and Services • Safe savings • Affordable credit • Christmas/Holiday savings • Insurance • Pre-paid debit cards • Current accounts • Budgeting accounts • Cash ISAs, mortgages, business accounts

  8. Tried and tested model Weathered the storm Manypositives… Fairer returns Local identity Our time?

  9. Alternative to high cost credit? • Leading doorstep lender charges 399.7% APR • Leading payday lender charges 5,853% APR • Not designed as occasional service; designed to trap customer • Aggressively marketed • Rarely appropriate • Rarely affordable

  10. Alternative to high cost credit? • Credit union lending based on ability to repay • Affordable repayments over reasonable term • Maximum interest of 26.8% APR • Cap raised to 42.6% APR from April 2014 • Often 12.7% APR or lower • Holistic approach to building financial capability

  11. Alternative to high cost credit? • Some credit unions offer an instant credit product, but difficult to do so sustainably • DWP Credit Union Expansion Project • Up to £38m investment to modernise credit unions • Shared back office and IT platform • Target to serve an additional 1 million credit union members by 2019 • Contract awarded to ABCUL

  12. Participation in CUEP 78*Credit Unions 320,000members • £150m loans • £210mdeposits 61Credit Unions 280,000members • £134m loans • £182mdeposits 31Credit Unions 160,000members • £61m loans • £80mdeposits *More credit unions expected to join phase three

  13. Alternative to high cost credit? • Need to recognise much of the demand for instant credit is misguided • Poor budgeting • Flawed financial decision-making • Building financial capability is key • Saving is the best alternative to high cost credit!

  14. Alternative to high cost credit? • Is there consumer demand for short term credit? • £2bn industry and growing rapidly • But is demand for short term credit or instant credit? • Most instant credit is short term credit • Designed as a trap • Can instant credit be offered as an ethical product?

  15. Welfare Reform – Challenges for credit unions • Reduced saving • Risk of default on loans • Risk of members in arrears with other bills • Need to review lending policy • Danger of members turning to high cost credit or loan sharks

  16. Financial education, building confidence Better value savings and loans How can credit unions help? Secure bill payments Automated budgeting

  17. BILL PAYMENT PROCESSES

  18. CURRENT ACCOUNT PROCESSES

  19. HOW CAN LANDLORDS HELP? LANDLORDS Marketing Premises Volunteers Deposits Promotion to staff Strategic partnerships (So not just funding!) CREDIT UNIONS

  20. Referral system in place. HA staff trained in key processes Funding for the Credit Union Current Account Fuel poverty loans and white goods scheme Arrears and evictions down as a result HA staff on credit union board, increasing expertise

  21. ‘Matched savings’ scheme in place with local landlords Landlords publicise the credit unions and encourage saving Tenants given rewards for meeting savings targets Builds on Savings Gateway findings, which demonstrated that matched savings increased savings among those with low incomes

  22. Key points Partnership working Expanding membership Modernising services Access to affordable loans Building financial capability

  23. More information… ABCUL Head Office: 0161 832 3694 www.abcul.coop www.findyourcreditunion.co.uk info@abcul.org

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