Forming a Credit Union

You want to start a Credit Union!

I suggest you start by looking at the website www.abcul.org for ABCUL (Association of British Credit Unions Ltd), the largest trade association of Credit Unions in the UK to find out what a Credit Union is, and how to start one. It is vitally important to find out where there are other Credit Unions operating or groups proposing to develop a Credit Union near you. You will find that there is an immense amount of information to inform and help you.

You will also discover that many of the smaller Credit Unions around the country are planning to merge or have already merged with other credit unions to make larger Common Bonds. This is because of the FSA (Financial Services Authority), who took over in 2002 as the Regulator governing Credit Unions, are looking for Credit Unions to become strong and sustainable businesses. The FSA control who is able to do an official control function in a Credit Union as an Approved Person. The FSA website www.fsa.gov.uk gives the regulatory requirements Credit Unions now have to meet to safeguard members savings in the same way as for banks and building societies.

Also, it is well worth visiting the web sites of some of the larger Credit Unions in the UK e.g. Leeds Credit Union, who is one of the benchmark leaders, also Capital in Glasgow. (Find these and others using Google or via the ABCUL website.)

There is an ABCUL local Chapter network that you will be able to join to allow you to network with other local credit unions and steering/ study groups via regional meetings, training events and local conferences. ABCUL also run an active discussion forum on their web site www.creditunioncommunities.org for credit unions to share information and help each other.

The other major learning and networking opportunity is by attending one of the two national conferences arranged by ABCUL in Blackpool and in other parts of the country. These offer quality seminars and training session on subjects relevant to the development and operation of Credit Unions, and offer an excellent opportunity to hear and talk to speakers, who are at the leading edge of Credit Union development, including speakers from the Treasury and the FSA. Having a good enthusiastic and energetic team with professional skills is key to running a successful Credit Union today, in order to satisfy the FSA's demanding requirements. You will need people with vision and the desire to help folk in their community get out of financial exclusion and willing to respond to an invitation to help you set up or run a Credit Union. Many Credit Unions find it difficult to attract and retain sufficient volunteers with the necessary skills, e.g. financial, business, marketing, human resources, IT, and able to give adequate volunteer time to make the business grow.

Do not underestimate the time, commitment and dedication involved in initially identifying and bringing together a team who can work together, in getting trained, doing the necessary research and developing an effective and successful business plan. After months and months of effort you will finally be able to submit your application and business plan to the FSA, to convince them that your team have the competence and resources to launch and run a successful Credit Union. Typically, setting up a Credit Union from scratch can take three to five years.

Churches often desire to have credit union services in their town. They can start by holding a public meeting to identify need and interest in starting a Credit Union and then establishing a steering group in the town to develop the idea. In view of the new model requirements for Credit Unions to grow and operate as a sustainable business, the steering group early on should consider joining other Credit Unions in the County to form a Federation. This is primarily for joint training events and sharing marketing resources, but also to discuss ways of working more effectively and learning from each other.

The Federation may conclude quite quickly that the best way forward to offer credit union services in the area, is to ask a neighbouring Credit Union to extend the area of its live or work Common Bond to include their geographical area. Consider putting up Directors for their Board to help them prepare a robust business case to the FSA to extend the common bond.

Many churches look to getting involved in Credit Unions as a means of helping those who are financially excluded. It is rarely wise to give more credit to those already over committed or in debt without first referring them for advice, or alternatively, directly giving them debt advice to help resolve their debt problems. A loan from a Credit Union (as credit is often unavailable from anywhere else) can be a useful part of the strategy to get them out of debt. Church folk trained as debt advisors or budget counsellors/coaches can also make useful volunteers for a Credit Union. As well as helping members with money matters their knowledge and awareness of resolving debt problems can help them make sound loan decisions.

A number of Churches up and down the country are looking to establish debt advice centres to which Credit Unions can refer their clients. Should you wish to help your local community in this way, you can find out how to set up a Debt Advice Centre from Stewardship by sending an email to office@stewardship.org.uk.

You can obtain further information about guides to money education from Credit Action at www.creditaction.com. If you know of someone who needs immediate help with debt and money advice, call or refer them to the Consumer Credit Counselling Service telephone Helpline on 0800 138 1111 or go to www.cccs.co.uk.

So what should you do now? Go on the ABCUL website and search for the nearest Credit Unions to you. Then arrange for your team to go and meet other teams and learn first hand how they started, how they operate and what is their vision for growth. Then register with ABCUL as a study group, arrange or attend local training sessions, start attending regional meetings and sign up to receive regular mail shots.

It is very difficult to start a Credit Union from scratch today, so I suggest you endeavour to explore if it is wise to develop a Credit Union yourselves, or whether it is better to work jointly with other study groups to develop a larger and therefore a more sustainable Credit Union.
Alternatively, consider meeting with a neighbouring Credit Union and asking them to extend their Common Bond to include your area. Anyone interested in volunteering from your church or locality can then join the Board of Directors or the marketing team after some initial training.

There are lots of volunteering opportunities from helping the treasurer to arranging marketing or training, or helping with compliance checks, to mention only a few.
I hope the above notes get you excited and will help you get started on the road to developing a credit union.

I wish you well with your project.

Best wishes
David Lynn

Secretary - Lincolnshire Credit Union Ltd
Tel: 01476 402 161 Mob: 07967 807 170 Email: david.lynn@iee.org.uk