Armed Forces Credit Union

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We've been approached by someone who is looking to start a Credit Union for the UK Armed Forces, both currently serving and ex. This isn't a type of financial institution I've come across before although I gather the US one is relatively successful.

Anyone got any thoughts?
 
Google will provide much more details but briefly.

Credit Unions are more widely known in places like the US and Europe etc. They are an alternative savings and borrowing facility and I'm surprised they are not more widely known about and subscribed to in the UK than they actually are.

They are usually setup to serve a particular group. For example, a local authority may have a credit union that provides savings and borrowing services for their employees and former employees. They usually provide a decent rate for savers but don't crucify borrowers with exorbitant lending rates.

You can't just set one up and get on with it. There is a body that provides oversight and guidance and whatever is proposed must meet the criteria set down to ensure things are done properly.

A good Credit Union properly run can be very useful to it's members.
 
I've had limited dealings with credit unions as part of my work - not as a user, but setting up meetings etc with folk who are in trouble financially. So far I haven't come across a duff one - they tend to be set up on a local level and the ones I have had dealings with all seem to be reasonably well 'looked at' by the local authority. Most of the people I have referred have been in trouble with loan sharks (and I include Wonga etc in that) and the CU's have generally used the services of a tame CAB-type volunteer or, in one case, a volunteer financial adviser who assists with mortgages etc but also seems to have a good knowledge of the sharks.

From what I can see, it's not a simple lender, but a Mr Micawber type of set up, encouraging saving as the first function, and lending (within strict limits) as the secondary function. Almost like a local crowd-funding operation.

The reports I've had back (apart from the idiots who con the CU to get a bit more dosh for drugs etc) are that they work and provide some relief (not just financial but emotional as well) for those that are in truly sticky situations. One case springs to mind of a couple who got hit with two lots of funeral expenses in a month (no insurance etc) and both are now involved as volunteers with the CU concerned.

Overall, I think they're a good idea and would welcome a look at what a CU could do - I'm going to have some larger expenses over the next few years as the sprog goes off to become a rocket scientist, and don't really want to be reliant on the Big Four.
 
Credit unions have to be based on shared characteristics eg same employer, church, geographical area [edit: this is known as "the common bond], so a credit union for the wider armed forces community would in that sense be a possibility.

ARRSErs will remember discussion of the Archbishop of Canterbury's ideas about credit unions offering an alternative to payday loans. I believe that credit unions tend not to be competitive in the rates offered to personal savers or (sometimes) the transparency of those rates, so the problem can be attracting in enough money to be able to lend it out.

I have heard that one well established employment-based credit union is for workers with Glasgow City Council. I also understand that the Welsh Government has been seeking to boost the credit union profile in the Principality, with mixed results.
 
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DaManBugs

LE
Book Reviewer
Credit Unions are the way to go! You're not so much a customer, but rather a member of a Credit Union. That entitles you to save with them and they. in turn, lend your money to the circle of members involved. There are very strict criteria for what they can do and an AGM every year votes for the board members and also the advisory body, as well as the amount of interest paid out on savings accounts.

I've been a volunteer at our local Credit Union for the past eight years, simply because I know how very beneficial they are for ordinary folks. They've been a big hit in Ireland since they (or their forbears) were set up in Germany in the 19th Century, where they were called "Raifeissen banks".

One of the peculiarities, and attractions, of loans from Credit Unions is that interest is paid on the "descending principal" system. That means that if you borrow, say, £500 and the monthly instalment is £20, the next monthly instalment is calculated on the basis of the £480 left as the principal. In contrast, a bank charges interest on the full loan sum from beginning to end.

If a Credit Union can be set up for squaddies, then I'd call that a very positive step and would prevent them being ripped off by the usual con-merchants.

MsG
 
Many of you will know of the Sparkasse(n) in Germany, which is not one bank, but a network of hundreds of savings and loan unions each known by their own name. They are the ultimate Credit Union and they are obliged by law, in order to keep their licenses, to support the economy in their local area. This includes small businesses, house builders, home buyers and local community organisations.

If you can obtain a license to operate a Credit Union, with all the governance, oversight, reserves and legislation, then I think such a setup for the Armed Forces past and present would be a great idea. Just don't let the NAAFI run it, and don't allow a preponderance of retired senior officers onto the board or it will go the same way.
 
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Credit Unions are the way to go! You're not so much a customer, but rather a member of a Credit Union. That entitles you to save with them and they. in turn, lend your money to the circle of members involved. There are very strict criteria for what they can do and an AGM every year votes for the board members and also the advisory body, as well as the amount of interest paid out on savings accounts.

I've been a volunteer at our local Credit Union for the past eight years, simply because I know how very beneficial they are for ordinary folks. They've been a big hit in Ireland since they (or their forbears) were set up in Germany in the 19th Century, where they were called "Raifeissen banks".

One of the peculiarities, and attractions, of loans from Credit Unions is that interest is paid on the "descending principal" system. That means that if you borrow, say, £500 and the monthly instalment is £20, the next monthly instalment is calculated on the basis of the £480 left as the principal. In contrast, a bank charges interest on the full loan sum from beginning to end.

If a Credit Union can be set up for squaddies, then I'd call that a very positive step and would prevent them being ripped off by the usual con-merchants.

MsG

+1
In a nutshell, you can borrow a multiple of the shares (savings) you hold, depending on your history with the CU.

If your loan repayment is say €25 a week, it will actually be €30 because you also have to put the €5 into shares (savings). So as well as paying off the loan you are also saving. The downside is that once you get a loan you can't take your savings out until you have the loan repaid (unless you increase /extend the loan).

The plus said is assuming the CU makes a profit, you get dividends on your shares. The strange thing seems to be that you also may get a rebate on your loan, maybe about 1-3 weeks repayments payments. You can take the dividends and rebates in cash or put them off the loan.

A lot of CUs here could end up in trouble over the next few years, as like banks they make money by lending. But like the banks they over lend.
 
Is it just for borrowing?

In the US, credit unions seem to operate like banks - current accounts, physical branches, VISA cards and the like. The only real difference is that they're member owned.
 

sirbhp

LE
Book Reviewer
I belong to the oddfellows credit union, i just put enough away to pay for my funeral. We had one in Sarfend which went bust as they lent too much to disreputable people who refused to pay any loans back . ( I think a rule of thumb is you may borrow as much as you have saved)
If the Armed forces one had , for example , the RBL backing it with intial funds of say 250,000that would be great . However if its a bunch of well meaning folks not from an organisation I would be a wee bit careful.

Credit unions are a superb way of low cost loans keeping folks out of the clutches of high street high interest loans and of course the loan sharks.
 

DaManBugs

LE
Book Reviewer
Is it just for borrowing?

In the US, credit unions seem to operate like banks - current accounts, physical branches, VISA cards and the like. The only real difference is that they're member owned.
And that actually is "the real difference", Deltadog. They (the Credit Unions) don't have to pander to shareholders in the normal sense. They don't have to produce "profits" come what may so that board members can trouser their obscene salaries. They're their for their members and to provide credit at humane levels. I realise that it all goes against the relevant Capitalist dogma, but it really works and goes a long way to providing funds at affordable rates to local start-up companies too, that would normally be ruthlessly ripped off by the banks.

MsG
 

DaManBugs

LE
Book Reviewer
http://www.echo-news.co.uk/news/9015948.Credit_union_shuts_as_money_runs_out/

loans of 20k, no wonder they went bust , normally you ate looking at a few k only .
We heard about this too (at the Nottingham Credit Union). We honestly wondered what they thought they were doing. A Credit Union can only loan so much and it's a constant balancing act to ascertain the viable level and keep funds in reserve for emergencies. We've managed to do that very well up till now and we go from strength to strength as more and more folks realise the advantages we offer. If a Credit Union is run by numpties who can't get away from the destructive Capitalist principle of maximimising profit come what may, then it's doomed to failure, I'm sorry to say.

A Credit Union is essentially a non-profit organisation and initially the UK gobment imposed a bewildering array of constrictions on its regulations to make sure that it was no competition to the regular banks. In the meantime, we've won any number of cases to extend our services and it shouldn't be too long before we can offer ourselves as a genuine and humane (and infinitely more community friendly) alternative to the ruthless Capitalist rip-off banks like HBSC, NatWest, Barclay's, Lloyd's, etc, that are only interested in their bottom lines and arrogantly disregard the human lives they destroy in their endeavour. I look forward to that time.

MsG

PS. Is their any chance that ARRSE could adopt a UK spell-checker? I'm totally pissed off with having my "spelling mistakes" red underlined by some wayward Septic concept. Just a thought.
 

DaManBugs

LE
Book Reviewer
The more I think about an Armed Forces Credit Union, the more I like the idea. If it also included the Reservists, the Territorial Army or whatever they’re called this week, then it would really represent a formidable and independent armed forces financial system that would truly serve our ladesses and lads and look after their best financial interests. I’m just a bit envious that I never thought of it in the first place myself, being as I’ve been a volunteer at the Nottingham Credit Union for so many years.

If this is to get off the ground in a meaningful manner, then it has to be presented to the ladesses and lads as a genuine alternative to the present Capitalist rip-off systems they have no option but which to bows down to and which are operated by all the main banks and the representative companies that pretend to represent their (the ladesses and lads’) interests. They don’t!

If there’s any progress in the direction of actually founding an Armed Services Credit Union, I’d very much like to be part of the action. Not only because I’m a Socialist down to my bootsoles, but because I’m an ex-squaddie myself and intensely interested in preventing subsequent generations of squaddies from being roundly shat upon by unscrupulous gobshites intent on their bottom line.

If anyone knows anything about the possible foundation of an Armed Forces Credit Union, please get in touch. I feel that I may be able to make a positive contribution, considering my experience. Just saying, like.

MsG
 
Generally the credit union should be for smallish loans, probably under €5k, 2nd hand car, Christmas, wedding etc.

You sometimes have to have a guarantor.

The Irish CUs generally are geographical ie you join your towns CU, which is independent (a bank with just 1 branch). You can't withdraw money from anywhere else and no ATMs.

Your family get a small payout if you die, any loans cleared and your shares. You would also see them offering life and health insurance (as part of a group policy).
 

Al R

Old-Salt
Is this a financial services company looking for a marketing outlet to hang a trading style on? If so, fair enough - it'll stand or fall on its own merit. But having a Credit Union is one thing, understanding what you're doing with your money before you need to borrow is another. The MoD flirted with financial capability training in 2009 and allowed it to drift away.

If there's one thing. I've learned about the financial services sector, people who have the most philanthropic of ideals in the brochure, are still in it for themselves. Either that, or they're listless and bored and looking for something to fill their time and hey, you're it. Credit Unions are seen as the next thing after Wonga, and this ad shows how the CU market is evolving - it offers payday loans.

http://www.creditunion.co.uk/Payday Loans.htm

In essence, prevention is better than cure, many Credit Unions are job clubs and remember, they can fail - they failed in the US and they are starting to fail across Europe. The idea is great but there is much I don't like about Credit Unions. They are very much of the moment, 'us' against the big boys.

Maybe I'm just a cynic - Credit Unions have had shedloads of cash from government and other banks (via state compulsion) and have been pretty ineffective and don't get anywhere. I get the impression that many of the folk behind them are very savvy marketing early adopters (hence the approach to ARRSE looking for a branding jv maybe) but when it comes to it, we already have the basics in place - we just don't use them well.

http://www.bbc.co.uk/news/uk-wales-politics-30794282

When more go to the wall, as they will, the disproportionately large start up help they have received will be a cost shouldered by the tax payer. Bah humbug.
 
Credit Union Australia is a great example of how C.U,s should be run and the great benefits they have for their members,we have been members since emigrating in 96 ,we had 2mortgages with them and they are handling our finances while we are in spain in conjunction with the sparkasse in Germany, for a few years ,In my opinion a CU for the armed forces would be a good thing with correct management, working on the principal of saving before borrowing, not much danger of losing money, if it works in Aus why not in UK!!!!
 

Al R

Old-Salt
You hit the nail on the head 1) with correct management and 2) with correct saving. People don't save and that's the problem. If you want a provider to pay you good rates of interest, it needs to make a profit too. That level of service costs.

Aus is a completely different structure to the UK, it lead the way in investment platforms for instance and we followed. But applying something that is part of the established culture there, parachuting it into the UK and expect it to have a similar response and cultural take up, overnight, is another matter. The trouble is in getting there.

We want to run around and expect CU to save us from Wonga and nasty bankers - Aus gravitated towards CU because they were set up to help fledgling, tightly knit communities when banks couldn't. The biggest risks in the UK are management, compliancy, regulatory and default. That's the gritty reality.
 

DaManBugs

LE
Book Reviewer
Generally the credit union should be for smallish loans, probably under €5k, 2nd hand car, Christmas, wedding etc.

You sometimes have to have a guarantor.

The Irish CUs generally are geographical ie you join your towns CU, which is independent (a bank with just 1 branch). You can't withdraw money from anywhere else and no ATMs.

Your family get a small payout if you die, any loans cleared and your shares. You would also see them offering life and health insurance (as part of a group policy).
Since the regulations were loosened somewhat back in 2011, Credit Unions in the UK now provide normal banking services, i.e. current account, etc and also issue members with credit cards, if they so wish. It's slowly coming to the point that the Credit Unions are more or less like normal banks, but much more humane.

It's just a shame that only about seven percent of the population in the UK are members of Credit Unions, against something like 55 percent in Ireland. Although they've played a significant role there for much longer due to their original remit of extending loans to the rural population, whose financial situation made them a bit of a dodgy bet for the commercial banks.

And insurance is automatically included in the UK too, with the maximum savings amount being anywhere between £10,000 (Nottingham Credit Union, Derby Credit Union, for example) and £15, 000 (Leeds Credit Union).

MsG
 
Credit Unions in the US can be large, approaching the model of the old Mutual Building Societies in the UK.

I have a mortgage with one, we qualified on geographical area, although the CU was originally set up for employees of a government entity. We are also members of another CU, much the same, for workers of a specific publicly-owned company. Again, we qualified because of geographical area.

They are moving to become much like banks, but are mutually owned. Both of our CUs offer mortgages, loans, credit cards and savings accounts, bonds etc. They have multiple branches in the local area, and offer online banking.

On the pure banking side, there is USAA, originally the "United Services Automobile Association", which offers insurance, banking and lending. You have to have a military connection to be a full member. There's only a couple of brick and mortar branches, the rest is online.

USAA doesn't have a network of owned ATMs. You can use pretty much any ATM, and they refund ATM fees up to $10/month. Much cheaper than owning and servicing all those machines, I should imagine.
 

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