How credit unions help to Close the Gap
To mark Co-operatives Fortnight 2011, we've been calling for action to Close the Gap by sharing wealth in a co-operative way. Credit unions are a key example of this approach in practice, so we invited Ian Guest - who runs a branch of South Yorkshire Credit Union and is also a member of Barnsley Church Action on Poverty - to tell us more:
A credit union is a co-operative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.
Every year the members elect a voluntary board of directors to run the credit union; this means no large payouts to fat cat directors - everyone gets a fair share of the profits.
Credit unions are authorised and regulated by the Financial Services Authority, and all savings come under the government’s savings compensation scheme.
Credit unions offer services to the financially excluded to compete with the high-cost ‘doorstep’ lenders, and the high-cost hire-purchase providers of furniture and electrical items. This means that instead of millions of pounds being drained out of our communities in extortionate interest paid to big business and fat cats, this money is retained in the local community to be spent on families.
All profits made by the credit union are retained in the local community and returned to members in the form of interest to those who save.
Credit unions offer an alternative to illegal loan sharks, who prey on the most desperate and vulnerable in our society and who charge interest rates as high as 17,000% and make their victims' lives miserable .
Credit unions in the UK vary widely in their services but all have a basic core service of savings and affordable loans. Credit unions are limited by law and the highest interest rate they are allowed to charge is limited to 25.68% APR.
Credit unions operate on a ‘common bond’; this can be employment-related, area-related or by association with an organisation such as a church. Some of the larger credit unions operate with everyone who lives or works in a large area such as a town or city. Many credit unions are able to offer other services such as direct dealing with the Co-operative Group to offer electrical goods; other local deals can be available.
Credit unions are fighting for the less fortunate in our community but are not able to operate on a level playing field; many restrictions are placed on credit unions, some at the request of the banks. These restrictions mean that credit unions in the UK are a mere shadow of what they are in other countries such as USA, Canada, Australia and Eire. We need the law to be changed and quickly!
I would ask you to join with Church Action on Poverty and call upon your MP to change the law on co-operatives so we can close the gap between rich and poor.