The Co-op Credit Union – an alternative to high cost lenders

Operations manager Andy Davey looks at the main challenges for the sector as well as the opportunities brought by new technology

Last year marked the 20th anniversary of the Co-op Credit Union (CCU).

Based at One Angel Square – the Co-op Group’s headquarters in Manchester – it operates across the country, boasting 8,500 members and managing over £5m of members’ savings, and loans of £2.5m.

Established in 1998, CCU is one of the two credit unions available to employees of the Co-op Group, who can also get access to savings and loans through the Value Credit Union.

But it’s open to employees and members of several other co-ops too, after it successfully applied in 2007 to the FCA for an extension of its common bond to include all co-op employees in the UK.

Initially, the common bond applied to employees working for the Co-operative Bank, the Co-operative Wholesale Society, Co-operative Insurance, the
Co-operative Union and the Association of British Credit Unions (Abcul).

And it’s racked up some impressive numbers; following the introduction of the national common bond, CCU saw assets grow from £1.5m in 2011 to £5m in 2016 – while membership rose 66% and assets went up by 94%.

Reserves increased by 127%, from £217,000 to £493,000, while loans increased by 9.5% over the same period, from £2.1m to £2.3m.

Now it is trying to build on this – and at the same time make members and non-members aware that it offers alternatives to high cost lenders. A recent study showed around 60% of members have some sort of payday lender or high cost lender showing up on their bank statements or payslips.

CCU’s approach also allows members to save as they borrow. To secure a loan, they have to save a minimum of £10 per month and see their deductions on the payslip. Any surplus made by the credit union is returned to members as an annual dividend paid on savings.

Members can get loans between £50 and £15,000. Processing loans can take from 45 minutes for members to three days for non-members. However, urgent requests can be dealt with sooner provided they are a viable lending option.

Accounts vary from the regular share account to a Christmas saver, university fund, baby fund, wedding fund and home deposit fund.

Most credit unions across the UK are cash rich, says Andrew Davey, CCU operations manager. He believes this is one of the biggest challenges for the sector; it is becoming “increasingly difficult” for credit unions to lend to members. For instance, only a quarter of CCU members are borrowers.

“There appear to be increasing numbers where members and potential members are struggling with their finances,” he adds. “Quite often, a credit search can reveal missed payments or defaults on existing lending facilities. It would seem the nation as a whole is feeling the strain of financial pressure and something needs to be done.”

This is the biggest challenge facing CCU, he warns. “A lot of people, not just our members, are over-committing with finance. The last thing we’ll do is issue a loan to someone who cannot afford it. Ultimately, we have to ensure it is affordable.”

To help people better manage their finances the credit union has an online budget calculator available for free to members and non-members.

CCU uses social media to engage with members and the wider public. Its blog is also constantly updated with tips and news.

The Member Access section of its website, where members can check balances, download statements and send secure messages, had 4,900 hits in December, nearly all through a mobile.

CCU recently adopted a cloud-based system, which enables it to send text messages to members, including links to its newsletter. The move proved to be cost effective, says Mr Davey, since it eliminated postage costs. “Text messaging is working and we will continue to do that.”

Some credit unions are changing their name and rebranding to reach out to people from outside the co-operative movement. But the Co-op Credit Union thinks its name is a crucial demonstration of its co-operative ethos.

“We have no desire to remove credit union from our name,” says Mr Davey.

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