1)         What is a credit union?

Credit unions are mutual savings and loans societies. Membership is based on a 'common bond', something which links members together. For example, it could be that members live or work in the same area or work for the same employer.

The credit union movement has been growing strongly. There are about 700 credit unions in Great Britain, with over 300,000 members and around £200, in assets.

In other parts of the world, the credit union movement is very large. The movement is particularly strong in the USA, Canada, Ireland and Australia.

 2)         What services do credit unions offer you?

Credit unions aim mainly to encourage people to develop a habit of saving. Once a member has established a record as a reliable saver, they will then be entitled to borrow from the credit union. The amount a member can borrow is usually limited to no more than three times the amount the member has saved.

Usually, members of credit unions borrow small amounts to pay for holidays, for Christmas presents, or to replace household items such as TVs or washing machines.

The larger credit unions offer a wider range of services such as bill payments, travellers cheques and larger loans which may be repaid over longer periods.

When you borrow from a credit union you are generally given free life assurance cover to the value of the loan. So the loan will be repaid if you die before it is fully paid up.

 3)         Why people choose to join a credit union

·       Credit unions are run by volunteers elected by members of the credit union. You can get involved in making decisions and getting things done.

·       Credit unions are not allowed to charge more than 1% a month on loans (APR 12.68%). So, they are an alterative to loan sharks who charge much higher rates of interest.

·       Credit unions can pay up to 8% a year on your savings. As mutual societies, credit unions are 'not-for-profit' organisations so any operating surplus - money left over from running the credit union - can be repaid to the members in the form of a dividend on their savings or used to improve the services to members.

Credit unions in Great Britain now come under the regulation of the Financial Services Authority (FSA). This means that those running credit unions in Great Britain will have to be approved by the FSA and they will have to comply with certain rules in the way they run the credit union.

Credit unions in Northern Ireland are not regulated by the FSA but are regulated by the Registry of Credit Unions and Industrial and Provident Services.

4)         What’s in it for me?

 Credit unions are local savings schemes with access to very cheap loans. And, if you want to get involved you can help run it.

 5)         How do I save?

 You agree to make regular payments every week or every month either through your payroll or at local collection points.

 6)         If I need a loan, how would I go about it?

 You must be:

·            Over 18 years old                                                                    

·            A regular saver

Different credit unions

You will not be refused if:                                                                 have different rules

·            You show that you can repay loan

·            Because you have been refused loans elsewhere

7)         What interested will I be charged?

The interest will be no more than 1% per month – 12.68% APR

 8)         How safe is my money?

 The Financial Services Authority (FSA) regulates Credit Unions.

All the money in a credit union is insured against fraud and dishonesty. If you want to withdraw your money at any time you can do so as long as you are in credit.

 9)         What are the advantages?

 They are local. The money is saved locally, spent locally to support local businesses and local jobs. If you want to help run the credit union you will receive training.  You will learn new skills, which can help you in other areas of your life.

 As the credit union grows, it will create new jobs for loca people and the range of services it offers could expand.

 10)     How do we get going when we depend on small weekly deposits and do we depend on “rich” men’s deposits to fuel the pump?

 We get going by recruiting quickly and in large numbers. 

And yes, we do need a balance of savers and borrowers.

 The “rich” and the not so rich are all welcome. This is an inclusive organisation.

 11)     Why should anyone put deposits into our credit union instead of a bank?

 The deposits will be as safe as in a Bank.

 The deposits will be insured.

The credit union will be regulated by the FSA (Financial Services & Markets Bill 2001)

The credit union has strict policies and procedures.

Local business people including bank employees run the credit union. It will employ staff who will be answerable to the Board of Directors, who are elected by the members.

12)     Do credit unions offer a good service?

 Credit unions thrive throughout the world. The international credit union movement is made up of over 100 million people in over 80 countries served by around 36,000 credit unions.

In the USA, credit unions are major players in the financial services markets. Credit unions provide cheques accounts, credit cards and mortgages to 25% of the American population. In Ireland, half the population belongs to their local credit union. Again, they provide a wide variety of financial services.

Credit unions also thrive in Australia and many countries in Africa, Asia and South America. One of the fastest growing movements at the moment is in Poland, where in less than 10 years, 220 credit unions has grown to serve almost 300,000 people. (This is already more people than the 20-year-old British credit union movement.)

The credit unions focus has to be on membership service and membership satisfaction If credit union directors are not providing a good level of service to their members, they could find they no longer hold their position as a director any more. In America and Ireland, credit unions are rated higher than banks for customer satisfaction.

Restrictive policies, unreasonable demands and a slow level f service is not going to encourage people to become, and then stay a member of your credit union. Services to members need to be the priority when developing the policies, which will enable you to run the credit union.

 A credit union should be able to provide a better deal to members as:

·            Credit unions have lower operating costs and overheads

·            They enjoy various subsidies and tax exemptions

·            Profits are returned directly to the members not third party shareholders

·            Credit union loan delinquencies are lower than banks (therefore enjoying a further cost saving in the cost of doing business)

·            The common bond produces a form of “customer loyalty”

·            Credit unions provide a friendly and local service

 13)     What does the future hold credit union?

 A Treasury Task Force advocated the development and expansion of credit unions to serve over 2 million people in Britain

 People who are concerned about the closure of bank branches and the demutualisation of building societies are also interested in the development of credit unions. Credit unions are a new local and mutually owned financial organisation on the High Street.

 It is also true that credit unions can contribute to the battle against financial exclusion. Particularly in relation to those who are excluded from the new technological options preferred by many thanks such as automated telling machines (ATM), telephone and Internet Banking. Those who are elderly, dyslexic, blind, unable to read or suffer from a form of learning disability will always require he helpful, fair and personalized service which a credit union provides. Credit unions are about people helping people. However, credit union social goals can only be achieved through their development of a sound financial business.

 A successful credit union, serving thousands of people within its community can make a very valuable contribution to financial exclusion. It can also provide good value savings and loan for everyone.

 14)     When would a dividend be paid?

 Each year after the annual accounts are completed the AGM is called.

 The members are asked to consider the annual accounts and to vote on the payment of any dividend out of surpluses.

 The maximum that can be paid is 8%. A rebate on interest paid can also be paid to reduce the 1% interest charged, to say ½%.

 15)     What is our tax position?

 An annual return called an AR20 is completed. Dues for the Inland Revenue are calculated on this form.

 16)     Are we just well meaning amateurs?

 No – many already professionally qualified business people and leaders in the community on this form.

 ·            We have a full training programme

·            We are run by strict rules

·            We have ABCUL to turn to

·            We have the FSA to support us

·            We have the Financial Services Compensation Scheme to back us up

·            We have the Financial Services Ombudsman Service to assist us with more complex cases of complaint

 17)     What are the benefits of joining your local credit union?

 ·            Safe savings

·            Save what you like, when you like

·            Cheap loans

·            Easy repayments

·            Free life insurance

·            Easy deposits – cash, cheques, payroll deductions, standing orders

·            Local deposit points at all Lincoln Co-op stores and INFOLINKS at North Hykeham and Metheringham

·            Main office open 10.00 am to 3.00pm Monday, Tuesday, Thursday, Friday

·            Private appointments available

·            Members hotline –

·            Confidential service

 18)     Complaints

Credit unions are required to have clear internal procedures for dealing with members’ complaints. You must first try to resolve your complaint with the credit union you are complaining about. If you have a complaint that you cannot resolve with your credit union, you can take it to the Financial Ombudsman Service – use Useful contacts. Get the FSA guide to making a complaint. This gives detailed information on how to make a complaint.

 19)     Compensation

 All FSA authorized credit unions are participants in the Financial Services Compensation Scheme (FSCS) –see Useful contacts. If a credit union is not able to repay members in full, e.g. because it has gone out of business, the FSCS will provide compensation, subject to limits.