BBC News – Why are credit unions not very popular?

[Legal Beagles]

Everyone from the Archbishop of Canterbury to the Duchess of Cornwall loves the idea of credit unions. Mutually-owned, locally-based and ethically-run, they provide low-cost loans for those who are least well-off – so saving them from the clutches of payday lenders. Yet despite such high-profile support, they have not caught on. Across the UK, just […]

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[Guest]

Re: BBC News – Why are credit unions not very popular?

The article seems to think that the reason that credit unions have not taken off in this country is because of the availability of higher interest saving accounts, actually credit unions are very popular, most police are in a credit union as are most nurses and other service industry workers, most of these provide mortgages for their members.

The credit union model is not about providing investment opportunities for savers, the CU's who have taken to providing these have had to run there savings operation in parallel to the loan and cooperative / mutual side of the traditional service.

The finical structure of the CU is strictly controlled by the the FSA, the money generated by savings has to be kept in a strict ratio and a large proportion kept as a financial reserve, so in comparison to a bank or building society it has less to lend out of its operating capital and that which it has, has to be loaned to its members, not invested elsewhere, were perhaps the returns may be more lucrative(although it must be said involve more risk).

The money is raised by giving loans, the interest on the loans is used to make more loans if any is left over it is given back to the members as a dividend at the end of the year(all the members)this is the total of what is done with the money there is none left over to pay interest on savings and no facility within the fundamental CU operation principle to accommodate it.

The thinking behind the CU is different to that which drives a bank or a building society. I think of it more like an insurance policy, where as instead of paying a premium you make a small investment int he way of a saving, if at some time in the future your big end goes or you need cash for a holiday, you give them a ring and they lend you the money, you continue to save you £2 a week or whatever but you also repay wherever you borrow, bit like having a wealthy and benevolent member of the family.

I have worked in the past trying to increase CU coverage and to be honest I have always had my doubts, CUs work better when they are smaller in my view, and linked to local communities, people pop in when they do the shopping,

I suppose old fashioned idea now with everyone doing there shopping at the local Tesco or delivered to your door, perhaps this where the CU offices should be looking at placing there services rather than some drafty old church hall. Thing is church halls are free to use(generally).

The idea is still a sound one though in my opinion, it just need someone to come up with an idea which makes it more relevant to the way people live their lives today.

[MissFM]

Re: BBC News – Why are credit unions not very popular?

If the CU's were allowed to behave in the way other "private" banks are (and I see no reason why they're not?) as described here:

http://www.consumeractiongroup.co.uk...y-from-nothing

then the "wealth" might filter down to those that both produce and spend it rather than be forever sucked upwards to the very few who both have too much and don't do either.

Then maybe Credit Unions would gain the popularity they deserve, to the huge advantage of the "real" economy.