You Never Give Me Your Money

Last Sunday at the Scottish League of Credit Unions AGM we had an emergency resolution calling for all Scottish Credit Unions to withhold payment from the Financial Services Compensation Scheme. The resolution was carried unanimously and with great enthusiasm. Unless you happen to be on the executive of ABCUL (who have cravenly accepted the will of the FSA), there are no grounds at all for the smallest part of the financial services sector to be bailing out failed banks. Credit Unions are volunteer run and (mostly) volunteer managed and disproportionately serve the poorer parts of society. It is not credible that a third sector organisation should pay for the failings of bank executives on six figure salaries.I am proud that we took the decision to stand together and refuse to pay: it's up to the politicians to fix this.

Financial Services Compensation Scheme

The safety net when a bank goes bust is the Financial Services Compensation Scheme. This is what guarantees that savers are protected. It has been brought into use 5 times in the past year to protect depositors at Bradford & Bingley, Heritable Bank, Singer & Friedlander, Landsbanki and London Scottish Bank. The scheme requires a levy on all the other members of the banking system to meet the cost.
The FSA are demanding that Credit Unions bear their share of the cost at a rate of 0.05% of assets - that's just for the costs of the banks going into receivership - if we have to meet the principal of the debts, the rate will be much higher.
How can I go back to my small community credit union and tell the members that they have to bail out the clowns who ran their banks into the ground? And worse, that we are being treated the same as RBS or Lloyds who have received £Billions from the Treasury, which they can now use to pay their levy?
It's just not on. I accept Credit Unions have some privileges in their relationship to government. But we didn't cause this mess and we should not be expected to sort it out.

The Social Fund and Credit Unions

Three points on the recent storm over whether Credit Unions might manage or distribute some of the Social Fund emergency payments the government makes to people on benefits:

• The association of credit unions with the "poverty industry" is deeply damaging to the prospects of growing the CU movement; for as long as government sees us as the Poor People's Bank and assumes that we are only there to deliver banking services to the poorest in society, we will never build the capacity or the critical mass we need. CU's need to attract depositors from across the communities they serve - it is socially better, it is economically better and it provides access to a far greater skill set for volunteers to draw from.
• The CU movement needs to show some independence from government and not be seen doing its bidding or trying to implement social policy. The Growth Fund was the worst example of that imaginable - CU's handed out public money to non-members with little prospect that they would become engaged in the CU movement, with little hope of repayment (the delinquency rates on these loans are horrifying) and probably with a significant portion of the funding being spent on drugs - that is the anecdotal evidence anyway....
• The decision of ABCUL to press government to lift the upper rate of interest a CU could charge has now been shown to be a PR disaster. The Scottish League vehemently opposed this and our member credit unions continue to charge at the traditional rate of 1% per month on the reducing balance of a loan (12.6% APR). The APR figure of 27.8% which has been widely quoted in press articles has been deeply damaging to the movement as a whole as it has enabled the less well-informed of the commentariat to claim that CU's are charging the same rate as Doorstep Lenders - hardly! The rates are comparable with a credit or store card, but I imagine those ill informed commentators cannot imagine that real people in need often face an APR of 100%+ with doorstep lenders or loansharks.