Credit Unions

[ToughButterCup]

@MikeSharp01 posted an idea that we might in his words '... crack a series of issue...'

Here's what he had to say (posted here) edited slightly below.

 

I have and idea for the pot that might crack a myriad of issues. We could set ourselves up as a credit union. These are very simple mutual societies many of which are run by volunteers. They can take deposits and make loans. The deposits are protected by the FSCS up to max (£80k ish) so no risk to deposited monies. Loans can only be short term max 5 years unsecured or 10 years secured on the borrowing members deposits. The max loan to a member is £7500 in excess of that members deposits. We would need to find a pump priming sum to kick start the Capital adequacy rules. It is a regulated activity but can be run by volunteers the main leading group have to be 'fit and proper' and sign up to running the business. We could set up our own membership rules but would have to be limited to people with an assoiation with our goals EG self builders or interested in self building issues - called a 'common bond'. To be a member we could insist on regular deposits. Interest on loans is charged per month and is capped at 3% per month but we could just set the rate to beat the bank for the depositers. Obviously it is a bit more complex than set out above but no more complex or onerous than a limited company. The registration is with FCA rather than the charities commission or companies house. There are annual returns however.  (accessed 01/12/2017)

[Declan52]

I am a member of my local credit union and it would do more lending than any of the banks in town. Always gives a better rate esp for travel money. First loan is double what your savings are then after that after it's paid of it's triple what you have in your account.  

[MikeSharp01]

4 hours ago, Declan52 said:

First loan is double what your savings are then after that after it's paid of it's triple what you have in your account. 

These are part of the union's individual rules - as I understand it we can make our own.

[Ferdinand]

I am a member of our Nottingham CU, which operates County-wide.

 

When I sold my big building site one of the things I tucked away in my head was to at some point in the next decade try and create a local initiative for this CU, since at present we are a town of 50k people with no local offline Credit Union facilities, and I know that Provident Financial have something like half a dozen full and part time doorstep lending reps in the town, each with hundreds of clients. The demand is driven by "I need money this afternoon" type needs.

 

One interesting thing about CUs is that they can lend perhaps 20-25x the amount of capital they have received, if it is the right sort of capital (basically: unencumbered capital which is not removable savings). The ABCuL CU trade body is very good to talk to. One of the things I was exploring was to make a capital loan of a smallish (compared to the money we spend on building houses) amount to the County-wide Credit Union, and help them provide facilities via a local community organisation leveraging off that capital.

 

But another is that the trend for the last 15-20(?) years is to CUs offering bank-like services, and consolidating. That was driven  That suggests that a  small, niche CU may be against the trend (why?). OTOH it may be that a tiny CU with a very focused common bond and specifically offering only simple services (eg not online current accounts) to keep the operation lean could be a good complementary new trend.

 

Another way could be to find an existing CU with a broad Common Bond that we could all join (eg if there were one for Co-op members - unfortunately there isn't), and create a Special Interest Group.

 

I do not see us really wanting to provide large amounts of organisation infrastructure as overheads would be too great, which is why I have been jabbering about piggybacking on other people, or using a very lean organisation.

 

Just my musings.

 

Further musing: could we work with Ecology BS?

 

Ferdinand

 

 

 

Edited December 2, 2017 by Ferdinand

[Ferdinand]

Here is the Association of British Credit Unions Ltd (ABCUL) "How to set up a CU" page:

 

http://www.abcul.org/credit-unions/setting-up-a-credit-union

[SteamyTea]

Can we merge some of these threads about money, it is getting hard to follow them.  I think there are 4 going on at the moment.

[ToughButterCup]

Lots to get our teeth into here. Thanks F.

Ian

[ToughButterCup]

2 minutes ago, SteamyTea said:

Can we merge some of these threads about money, it is getting hard to follow them.  I think there are 4 going on at the moment.

 

This thread is about Credit Unions. Merging it with others threads would tend to confuse. 

[Ferdinand]

Edited.

Edited December 2, 2017 by Ferdinand

[Stones]

 

At its simplest level, there is nothing to stop one member of the forum offering to loan money, on whatever terms they happen to agree, to another member.  I guess that any such loans would be relatively small, and in all likelihood, there would only be a limited number of individuals comfortable loaning on that kind of basis. That is not something that BH would really be involved with I suspect, it would be up to members to sort out privately.

 

P2P and CU's are in my view a lot more interesting, and one can see the potential in terms of the size of the self build community and its financing requirements. The question then becomes does BH want to morph itself into a body that is primarily a financing vehicle that happens to run a forum, or do those interested set up on their own, perhaps linked back by recommendation to BH, as you really would need to reach a decent size and have sufficient funds to offset the overheads that would inevitably be involved.  As @Ferdinand says, it may well make a lot more sense to talk to an existing P2P or CU to determine whether a focused stream of lending to self builders, funding by those who were interested, could be created and managed by them.

 

Given the size of the self build community and the experiences of those trying to fund builds, I suspect there is a decent sized market that could be tapped into, and consequently, money / good investment returns to be made.  

[joe90]

“At its simplest level, there is nothing to stop one member of the forum offering to loan money, on whatever terms they happen to agree, to another member. “

 

this is what this forum is, a talking place to exchange ideas and get to know people. If those people want to help each other it’s up to them. I have gained soooooo much knowledge from all you guys over the last few years and thank you one and all.