Presentation on theme: "B6 – CREDIT WHERE ITS DUE 11 September 2013 TPAS South Conference FRANK McKILLOP, ABCUL."— Presentation transcript:
B6 – CREDIT WHERE ITS DUE 11 September 2013 TPAS South Conference FRANK McKILLOP, ABCUL
CREDIT UNIONS IN BRITAIN ALTERNATIVES TO HIGH COST CREDIT? CHALLENGES OF WELFARE REFORM
What is a credit union? A financial co-operative owned and controlled by members Loans and savings plus newer products like pre-paid debit cards, current accounts and mortgages. Membership determined by a common bond - residence, employment or association Credit union ethos Providing services to people – not making money from them
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 What is ABCUL? ABCUL President Sharon Angus-Crawshaw
ABCUL provides: –Representation –Information and guidance –Training –Conferences –Networking –Collective buying –Collective vision and leadership What is ABCUL? ABCUL Chief Executive Mark Lyonette
390 credit unions Credit unions in Britain 1.04 million members Including 121,000 juniors £807m in savings £605m out on loan
Safe savings Affordable credit Christmas/Holiday savings Insurance Pre-paid debit cards Current accounts Budgeting accounts Cash ISAs, mortgages, business accounts Products and Services
Many positives… Fairer returns Local identity Our time? Weathered the storm Tried and tested model
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 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 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 Alternative to high cost credit?
31 Credit Unions 160,000 members £61m loans £80m deposits May 2013August 2013November 2013 Participation in CUEP 61 Credit Unions 280,000 members £134m loans £182m deposits 78* Credit Unions 320,000 members £150m loans £210m deposits *More credit unions expected to join phase three
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! 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? Alternative to high cost credit?
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 Welfare Reform – Challenges for credit unions
How can credit unions help? Financial education, building confidence Secure bill payments Better value savings and loans Automated budgeting
BILL PAYMENT PROCESSES
CURRENT ACCOUNT PROCESSES
HOW CAN LANDLORDS HELP? Marketing Premises Volunteers Deposits Promotion to staff Strategic partnerships (So not just funding!) CREDIT UNIONS LANDLORDS
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
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
Modernising services Key points Partnership working Expanding membership Access to affordable loans Building financial capability