Unions in line for low-cost credit

OVER the next few years, 1 million trade unionists are expected to join credit unions - low-cost savings and borrowings co-operatives - as a result of a new initiative from the Unity Trust Bank, a bank part- owned by trade unions, which specialises in providing services to union members.

Unity Trust says it expects to follow a new scheme for the Bakers Union with similar schemes for members of the Transport and General Workers Union, the General and Municipal Union and the shopworkers' union, Usdaw. The country's largest union, Unison, has long been involved in developing credit unions in association with local authorities.

One in four employees have joined credit unions where they have been established in workplaces, and Unity Trust expects a similar response among union members.

The British credit union movement has suffered from bitter in- fighting between two national bodies - the Association of British Credit Unions, which aims to promote them to large employers, and the National Federation of Credit Unions, which sees them as an alternative to money lenders in poor communities. Unity Trust has sidestepped this conflict by drafting its own rules that it hopes will be accepted by the Registrar of Friendly Societies, which controls credit unions.

Reductions in the rates of interest and inflation over recent years have favoured credit unions, enabling them to be more cost-effective than commercial lenders. Interest on borrowings is limited to 1 per cent per month. Profit distribution is by way of dividends to its depositors, determined at the end of its financial year, subject to a maximum of 8 per cent a year.

Deposits are currently limited to pounds 5,000, and loans to the value of a person's deposit plus pounds 5,000. These rules will be amended later this year, subject to Parliamentary approval, lifting the maximum deposit to pounds 10,000, and the borrowing limit to 1.5 per cent of the credit union's assets.

Unity Trust is offering central administration, making the credit unions more professional. The bank says that working with larger credit unions, and ensuring all payments come from direct debits or as deductions from pay, will reduce the cost of administration.

British Airways became the first large private sector employer to establish its own scheme as a staff perk two years ago. It now has 800 members, pounds 500,000 in assets - mostly on loan - and takes pounds 61,000 in payroll deductions each month. Depositors are likely to receive at least 3 per cent on their savings when their first dividends are approved later this year.

New schemes can only be established if members can enter into a "common bond", reflecting a community of interest. This is usually an occupation, a locality or an employer, and now, for the first time, a trade union. But under the proposed new controls, the need for a common bond will be replaced by a requirement for any new member to be nominated by two existing members.

Credit unions have been particularly favoured by taxi-drivers, who need the discipline of saving regularly as well as occasional substantial loans. In recent weeks, the National Federation of Credit Unions has been working to create new credit unions for prison officers, authors, illustrators and a Caribbean church.

The Catholic Church has also been very active in promoting credit unions. Father John Lally, of the Sacred Heart church in Leicester, said: "This is no coincidence, and arises from the justice and peace movement. We have asked how to work with deprived areas, and how to help people to help themselves.

"In Leicester, the Caribbean community has used them successfully for 20 years because they had difficulties in getting money from the banks. We want to serve the community."

The ending of the common bond rule could prove the most positive aspect of the change in regulations. Ironically, it may be particularly helpful for poorer communities, where too many people have wanted to borrow money, and too few could afford to make deposits. Now outsiders will be able to deposit money, knowing it could play a part in killing off the loan sharks.

o Association of British Credit Unions, 0171-582 2626; National Federation of Credit Unions, 0191-257 2219.

News
people

Arts and Entertainment
JJ Abrams' seventh Star Wars, The Force Awakens
filmsThe first glimpse of Episode VII has gone online after weeks of anticipation
News
Michael Buerk in the I'm A Celebrity jungle 2014
people
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
art

Presents unwrapped, turkey gobbled... it's time to relax

PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Citifocus Ltd: German Speaking Client Specialist

£Attractive Package: Citifocus Ltd: Prestigious asset management house seeks a...

Citifocus Ltd: Performance & Risk Oversight

£Negotiable: Citifocus Ltd: This is a varied role focusing on the firm's mutua...

h2 Recruit Ltd: Sales Director - SaaS (SME/Channel) - £140,000 OTE

£90000 - £140000 per annum + benefits: h2 Recruit Ltd: Are you a high achievin...

h2 Recruit Ltd: Telesales Executive - Cloud Software/SaaS - £37,000 OTE

£25000 - £37000 per annum + benefits: h2 Recruit Ltd: Are you seeking to furth...

Day In a Page

Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

Knitting pretty: British Christmas Jumpers

Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

French chefs campaign against bullying

A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Cuba set to stage its first US musical in 50 years

Cuba to stage first US musical in 50 years

Claire Allfree finds out if the new production of Rent will hit the right note in Havana
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

Paul Scholes column

I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

Lewis Moody: Lancaster has made all the right calls – now England must deliver

So what must the red-rose do differently? They have to take the points on offer 
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game