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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

FRANK McKILLOP, ABCUL

11 September 2013

TPAS South Conference

slide2

CREDIT UNIONS IN BRITAIN

ALTERNATIVES TO HIGH COST CREDIT?

CHALLENGES OF WELFARE REFORM

slide3

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

slide4

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

slide5

What is ABCUL?

  • ABCUL provides:
    • Representation
    • Information and guidance
    • Training
    • Conferences
    • Networking
    • Collective buying
    • Collective vision and leadership

ABCUL Chief Executive

Mark Lyonette

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Credit unions in Britain

1.04 million members

Including 121,000 juniors

390 credit unions

£807m in savings

£605m out on loan

slide7

Products and Services

  • Safe savings
  • Affordable credit
  • Christmas/Holiday savings
  • Insurance
  • Pre-paid debit cards
  • Current accounts
  • Budgeting accounts
  • Cash ISAs, mortgages, business accounts
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Tried and tested model

Weathered the storm

Manypositives…

Fairer returns

Local identity

Our time?

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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
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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
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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
participation in cuep
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

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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!
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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?
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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
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Financial education, building confidence

Better value savings and loans

How can credit

unions help?

Secure bill payments

Automated budgeting

how can landlords help
HOW CAN LANDLORDS HELP?

LANDLORDS

Marketing

Premises

Volunteers

Deposits

Promotion to staff

Strategic partnerships

(So not just funding!)

CREDIT

UNIONS

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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

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‘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

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Key points

Partnership working

Expanding membership

Modernising services

Access to affordable loans

Building financial capability

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More information…

ABCUL Head Office: 0161 832 3694

www.abcul.coop

www.findyourcreditunion.co.uk

info@abcul.org