“When the banks stopped lending we were there for everyone” – in support of the credit unions bringing old-fashioned banking back to our high street

They have cross-party support, a wave of new members, new premises opening in our town centres and financial strength unaffected by the credit crunch. With an aim to provide a listening ear, a caring service, community spirit and practical help, it is not just a return to the best parts of banking from the past but the entire service is provided by your neighbours for your neighbours.

Which is why, in comparison, the change in banking as we know it – longer queues or closed branches and call-centres where we once had a local bank manager and even first-name terms with bank staff – has helped a growth in demand for one group of credit unions in Northern Ireland.

That boost in popularity could be about to bring community lending and personal service to even more people if a proposed change in legislation allows companies and sports clubs to also use the services of a credit union.

The result woud be a shot in the arm for an already-booming and long-established movement and could see even more credit unions on the high street, in the heart of our communities, offering a broader range of services.

The Ulster Federation of Credit Unions, which is the smaller of the two main credit union groups in Northern Ireland, is also supporting two Department for Social Development-led pilot schemes looking at increased use of payment cards by credit unions and also looking at how to help credit unions bring banking to those left out in the cold by traditional banking.

Gordon Smyth, Business Development Manager with the Ulster Federation, explained that – despite new regulation in 2012 which sees credit unions labouring under a “watered-down version of the regulations covering international bankers” – their credit unions are seeing new members turn to their old-fashioned service in the community.

More people are seeing the level of service a credit union can provide. With bank branches closing people may be disenfranchised, especially if online banking isn’t suitable for them.

Thankfully, what we do is more like a a bank was years ago: the service is provided for the community by people from the community. You build savings, they get to know you and you therefore have a much more personal experience for the member.

“WE ALWAYS TRY TO HELP” – A FAIR HEARING FOR EVERYONE

Gordon, who worked in a bank for 35 years with 24 years as a manager before early retirement from “an industry changed beyond recognition” in 2012, is one of just two paid staff working for the Ulster Federation.

The other person, Heather, is the office manager who has been with the Ulster Federation for many years and provides support for the 45 affiliated credit unions, working five mornings per week.

While the Ulster Federation works as a trade body for the Ulster Federation credit unions by advising and supporting members on regulation while lobbying at Stormont and London, incredibly the network of 45 entirely independent credit unions is operated by an army of volunteers. The volunteers are supported by a small number of highly skilled staff in larger credit unions. Each credit union is independent and is run by a Board elected by the members at their AGM.

These are volunteers who have provided a service throughout the height of the troubles, always trying to help people when they can and listening to what people need.

And when the banks stopped lending we were there for everyone.

Gordon pointed out that the services the Federation credit unions offer are very easy to summarise.

We exist to provide savings and loan services through independent member credit unions who serve those with whom they have a common bond by way of where that person lives or works. It really is as simple as that. People they know will give the member a fair hearing and if someone is in difficulty we will do what we can for them.

Althougha larg the Irish League of Credit Unions, a larger all-Ireland body with a separate network of member credit unions, may offer debit cards in Northern Ireland and even mortgages in the Republic of Ireland, the Ulster Federation credit unions have remained more traditional in their thinking that “it is better to lend £1,000 to 100 people than £100,000 to one person”.

However, the proposed new legislation in the shape of the Credit Unions and Co-operative and Community Benefit Societies Bill, now at committee stage with a report due on 24th November, could bring about the biggest change in the local credit union movement since new regulation was introduced in 2012.

LEVEL OF REGULATION

The moves by the Stormont Enterprise, Trade and Industry Committee, chaired by Patsy Maglone MLA through the DETI-sponsored bill, would see corporate accounts made available in local credit unions.

For example, a butcher shop might find that their town bank branch has closed, meaning there are services the credit union could provide.

We’re really encouraged by it, there’s excellent cross-party support as everyone agrees that credit unions are doing a valuable job, Gordon explained.

The change would mean some credit unions who want to take advantage of the new legislation may have to develop the facility for standing orders, longer opening hours, direct debits, as well online services if they don’t already do so, in turn attracting more members to the movement.

Meanwhile, the two DSD pilot schemes are set to explore how credit unions can bring banking to more and more people while protecting the community from loan sharks and high-interest lenders.

The first pilot will look at how membership can be grown and look at government support such as advice to help a credit union open new premises in an area where the services are needed.

The second pilot will look at the banking platform, such as expanded card-based services. Although it is unclear how this would be paid for at present, Gordon explained.

And with progressive credit unions such as Cloughfern Credit Union, who moved into a former bank on Ballyclare’s High Street, and Slemish n tha Braid Credit Union in their new, modern credit union in Ballymena (“a good example of a modern, user-friendly, cross-community credit union”), it is easy to see how the expanded range of services could see each local credit union becoming even more of a household name.

The forward-thinking proposed Stormont legislation arguably sits in contrast to the stringent over-regulation of the movement introduced in 2012.

Gordon explaimed that while the Credit Unions (Northern Ireland) Order 1985 is still “on the books”, the 2012 regulatory response to the 2008 banking crisis saw UK bodies brought in to regulate a movement far advanced in relative size and popularity to anything seen in England, Scotland or Wales: 34% of people have access to a credit union here compared to 4% in GB.

The arrival of the regulators was a cultural change: historically, you got a loan and would then get another loan once the first loan had been repaid but now we need to look at a person’s ability to repay in new ways, although I agree that we need to do that. After all, you are borrowing from your aunt, your own family members and your own community.

At the launch of Slemish n tha Braid Credit Union in Ballymena Jim Allister commented that the level of regulation involved is heavy-handed.

The same regulations are used in slightly watered-down form as those used for the international banking industry, which is a challenge for members who had been running a credit union for some years. However, we work to help them understand what is needed.

It has raised challenges such as attracting new board members. While there was a need for regulation but people are now less likely to volunteer after a long day at work, Gordon said.

Credit unions were, before the 2012 change in regulation, overseen by DETI who kept to a fairly hands-off approach. However the removal of the Fincial Services Authority from the picture meant the arrival of two new regulatory bodies who were new to the movement in Northern Ireland: the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FAC).

Both regulators took a while to get to grips with what we did as credit unions had already been here for 50 years with a high penetration in the community. Meanwhile, the FCA are still on a journey to fully understand credit unions here and we are always happy to help with that.

We have a good working relationship with both and we are always proactive to help them come to terms with what we do in Northern Ireland. The FCA sent a speaker to our last AGM, and that was very useful.

After all, the regulators are there to help and we are there to help them in return.

Gordon explained that one proposed change to the CREDS – the ‘source book’ under which credit unions operate – would see a welcome return to the ability of a credit union tie up money in their own bank account for five years and would mean the “important” return of a feature which will benefit members through these funds becoming available again, with interest added, every five years.

The Ulster Federation does, however, have some concerns about the existing and proposed CREDS and continues to work with the PRA and FCA to address these.

PRESBYTERIAN MUTUAL, LIQUIDATION AND PAYDAY LENDERS

Gordon explained that conservative management of members’ funds and a focus on the simple purpose of a credit union has been a credit to the movement and its volunteers.

The Presbyterian Mutual, for example, moved from its core business of providing savings for members and assistance to those in need to becoming involved in property financing.

We, however, are wary that such areas need a different skill set. We have been conservative to a certain degree and have been very successful in managing our members’ savings in this way.

Gordon therefore warned against misunderstanding the purpose of a credit union, as the government had originally been inclined to do in response to payday lending before regulating that sector more closely.

We are lendng our members’ money and we want to help people but most of all we want to help them avoid being in a situation where they need to use a payday loan company in the first place. Thats why the Dutchess of Cornwall, who is herself a credit union member, promotes the credit union movement.

We are always conscious that we aren’t helping people if we make their situation worse.

The rare event of a credit union going into liquidation is covered by the Financial Service Compensation Scheme.

Money is returned by the FSCS, exactly the same as would apply for a bank. In recent the case of the Rowallane credit union former members were queuing to join a neighbouring credit union and most former members stayed with a credit union.

The Ulster Federation, Gordon explained, also works with the PRA to help avoid any repeat of issues which arise and help support the indepedent credit union boards to ensure proper governnance for their members.

DEBT RECOVERY – AN UNDERSTANDING ALTERNATIVE

Gordon notes that “community spirit has been diluted” as more people now move in and out of a community, meaning a lessening of the “you don’t let your neighbours down” ethic, creating a changed climate for credit unions and the prospect of bad debt.

We have had to adapt to do all we can to recover bad debt. We now work with a professional company based in Belfast who provide a caring, helpful service with support such as making calls to members which are beyond the capacity of a credit union due to their opening hours. They assist when they are asked.

Most of all we want people to come and talk to us us. Ignoring a problem is the worst possible thing as we can help with reduced payments or longer terms as we have that flexibility.

With personal lending people can find that a person’s circumstances can change very quickly and we have empathy with that.

WORK WITH THE IRISH LEAGUE OF CREDIT UNIONS

Although the first UK credit union was opened in Derry in 1960 with the support of John Hume under the Irish League of Credit Unions, the Ulster Federation was formed later (the first credit union opening in 1987 in South Belfast) to allow affiliiated credit unions in places where – Gordon explained – “there would have been less support for an Irish League of Credit Unions credit union”.

The world was somewhat different when the Federation came into existance. You still have that mindset in pockets, people who want to be doing their own thing.

Today, the Ulster Federation, which was originally part of a wider UK body but went its own way in 1995, works very closely with the Irish League to represent the sector in Northern Ireland. Gordon pointed out that “we each face similar issues” and added that “no one knows what the future will bring” when asked if the organisations might one day combine in some way.

HIGH RATES AND PRAISE FOR VOLUNTEERS

Gordon said a bone of contention for affiliated credit unions remains in that they pay rates if they own their building.

It would be a real help not having to pay rates. A credit union generates income for the local community and its work is provided by volunteers and a small number of skilled staff.

“While we have seen billions of pounds being poured into banks, credit unions in Northern Ireland have received little financial assistance at a time when they are suffering from the additional work associated with increased regulation.

These are small, local, prudent credit unions helping their neighbours.

Concluding by again praising the hard-work and community-spirit of volunteers and staff, Gordon added that it had been inspirational to see “so many people giving so much of their time to work for something valuable in the community through their common bond.

But we always need volunteers, including professional people, who want a great way to give back to the community.

In the meantime, while the credit union movement in Northern Ireland grows and grows, for those who feel excluded, dissatisfied or distanced from their bank or banking in general, a local credit union may well be holding out their hand to help and – if the new legislation comes into effect – be able to help in even more ways than ever.

*An academic study of the role of credit unions in the community in Northern Ireland can be found in this QUB MSSc dissertation by Jon Evans, a literature review looking at credit unions and community development. Jon’s paper was found online and is beyond the scope of this article but is included for reference.

* Photo shown is courtesy of the Ballymena Times.

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  • New Yorker

    Thank you for this post on the admirable credit union movement. The proposed legislation to include local businesses sounds good. I think there should be a regulatory agency just for credit unions, and that they should not be lumped in with banks because they are a separate species. I also think expansion into debit cards and online access is excellent. My local credit union has neither and I wish they did.

    The credit union movement is a real success that has helped a tremendous number of people and has not needed a bail-out. We should see more media coverage of them and the excellent job they do.

  • Many thanks – in truth I feel pretty much abandoned by my own bank. The passion and belief in what they do shown by these guys is such a breath of fresh air in comparison.

    As you can tell I was extremely impressed. Gordon spent a very long time working through the details for the piece. I genuinely wish the movement every possible growth and success.

  • Slemish Ntha Braid

    Great article, and thanks for using our new premises as a visual!

  • Very welcome – was so fascinated hearing about your work that I gave up even pretending it was going to be balanced article and made it ‘in support of…’ the work and the proposed new legislation.

    Congratulations on the new premises. You might get the odd long lost Raglan regular looking for a pint!

  • Slemish Ntha Braid

    Ahh if I’ve heard that line once, I’ve heard it 100 times already!
    The place has a great history and is a real focal point for the community which can only be to our advantage

  • Catcher in the Rye

    I am not sure how it is a positive that the credit unions were lending money to people who couldn’t get loans at the banks. Doesn’t that mean they’re less careful ?

    Several credit unions went bust over the past few years and, especially in the south, there were some cases where they were clearly lending money to people who could not repay it. I love the idea but without a bit more regulation and protection I couldn’t entrust my money to one.

  • I think it is more the case that the banks stopped lending full stop. Credit unions here appear to be conservative about lending money out – I believe the post 2012 regulations set the bar high for this – but everyone has a chance to build up savings and allow them to help that way.

    It is a bit behind my knowledge of the subject but a credit union going into liquidation could also be due to an issue re how it was being run. Each is completely independent but all are covered by the financial compensation scheme.

  • MainlandUlsterman

    All power to their elbow. I did some work in 2012-13 among people struggling with money issues and it was clear credit unions should be a big part of the solution.

  • There seems to be some big conversations going on between the credit unions and Stormont to see how that can work

  • Tochais Siorai

    Hi CJ, Are all of the branches of the UFCU affiliated to the Orange Order or are some of them independent?

  • The way I understand it is this: a credit union needs a ‘common bond’, which is usually where every member lives or works.

    Some Ulster Federation credit unions have a members’ common bond of OO membership.

    There are also local Ulster Federation credit unions who are simply based in an Orange Hall but are open to any local person.

    I honestly don’t know what percentage these types of credit union would be out of the overall 45 Ulster Federation credit unions. I’m not aware of the big ‘high street’ credit unions like Slemish n tha Braid or Monkstown (Ballyclare) having an Orange Order common bond as they’d be geographically based I’d assume.

    Edit: I checked and it was confirmed that the vast majority of Ulster Federation credit unions are open to everyone in the local area.