Credit Union questions answered Page 12, 13 & 14 Election ads

Who, what, where? Never heard of credit unions? You’re not alone. But there are good reasons why they’ve spread from their humble origins in the 19th century to a membership of over 100 million worldwide. In the UK, the growth of the movement has been slower than elsewhere in Europe. There are currently around 600 credit unions in Britain, ranging from small volunteer-run organi- sations to large credit unions covering widespread areas such as the whole of Merseyside or Leeds. Credit unions are different because they are financial co-operatives, owned and controlled by their members and run for the benefit of their members. Think of them as a more community-based version of a building society. Membership of a credit union is based on the idea of a ‘common bond’. This means all members have something in common – our common bond is RMT trade union membership. Paying dividends You don’t get paid interest on credit union savings in quite the same way as other savings accounts. Instead, you’re paid a dividend (which is paid without tax deducted, so you have to declare it on your tax return). By law the most this dividend can be is eight per cent a year. Unlike big banks, credit unions don’t cherry-pick the more attractive high-earning customers – they welcome people no matter how little they have to save. Currently the most you can save is £5,000 (although once we grow large enough we can apply for this to be £15,000 upwards) or 1.5 per cent of the total shareholding in the credit union, whichever is the greater. Low-cost loans In a recent study Which? magazine found that the best credit unions shame their bigger high-street rivals when it comes to loans too. Despite being relatively small organisations, they still manage to charge rates lower than big players, like Barclays and HSBC. And, by law, they can’t charge more than one per cent a month on the reducing balance of the loan (equivalent to an APR of 12.68 per cent). So they can be a partic- ularly good bet if you want to borrow small amounts over a short period of time. You cannot borrow from the RMT Credit Union until you’ve built up a history of saving – this can be as little as three months. Aside from this, credit unions take only your credit union history into account when deciding whether to lend you money, and they also loan small sums of money at the same attractive rates. These factors make them particularly good for people who have trouble borrowing money from mainstream lenders. Members who have been borrowing from doorstep lenders to pay for expenses like Christmas say that the repayments are very high as the interest charged on a loan is almost double the amount of the loan. Members say they would sometimes fall behind in their payments as they were so high. Members are only too pleased that the RMT Credit Union has opened as they can now apply for loans which they Joining the RMT Credit Union IF YOU’RE fed up with impersonal service and poor returns from your bank, why not try your union’s alternative – our very own savings and loans co-operative – the RMT Credit Union? The RMT credit union probably isn’t the first place you think of when looking for a new savings account or a personal loan. But perhaps it’s time to think again. Credit unions offer members inexpensive, flexible loans, and many pay good returns on their savings accounts too. Last year, £1,000 would have earned you £40 with a decent credit union – or as little as 80p with some high-street providers. And, although credit unions are small players in the financial services world, the movement is growing. Treasurer Frank Corr: “It’s terrific that RMT members will be able to benefit by being part of a democratically run financial co-operative movement.” 10 can afford and manage to save money too. You must be kidding Still not convinced that it’s worth your while joining a credit union? Well, if the rates on offer aren’t enough to make you think again, there are a few more things which make credit unions stand out from their commercial competitors. For a start, with no shareholders to keep happy, any money left over from running the credit union can be paid back to members as dividends on their savings. You can feel happy with the knowledge that the money you are saving is being used to help other people in your union rather than lining the pockets of fat-cat executives in the City. Also, credit unions provide free life insurance. If you die before you repay a loan, it will be repaid by the insurance. And if you have a savings account, the insurance can pay out up to twice as much as you have saved. Unlike lots of mainstream lenders, credit unions do not charge a penalty if you repay a loan early, and there are also no hidden extras to watch out for, like overpriced payment protection insurance. Credit unions also charge interest only on your outstanding balance, rather than the whole amount of a loan. Finally, as a member of a credit union you have a say in how it’s run. All members have one vote, and you can also stand for election to the board of directors. In short, our credit union is for anyone in the RMT, whether you’ve used up your cash ISA allowance and want to save, or you need a loan. With the number of financial scandals in recent years, it’s fair enough to be sceptical about moving your money to a new institution. Here we allay your fears with answers to some important question. Q Surely my money is safer in a bank? A Just because they’re often run by volunteers doesn’t make credit unions any less secure than any other financial institution. Since July 2002 they’ve been regulated by the Financial Services Authority (FSA). This means that there are rules about how they must be run, and the key people who run the credit union have to meet the FSA’s standards for approved persons. Our credit union has been scrutinised and passed by the FSA. You can raise any queries you may have by calling the FSA consumer helpline on 0845 6061234 or using the FSA Firm Check at www.fsa.gov.uk/consumer/fcs. Credit unions are also members of the Financial Services Compensation Scheme (FSCS), so if one goes out of business and can’t repay members in full, the FSCS will cover you. This is the same as you get with a bank or building society. Q Aren’t credit unions just for poor people? A Credit unions do offer affordable loans for people on low incomes with few other options, but they can also be a great choice for people with savings. Credit unions don’t just exist to serve low-income people, they are more inclusive than other financial institutions, and do their best to make sure everyone in the community they cover can benefit from their services. And there are good reasons why credit unions often pay such good rates on savings. The money credit unions get from their savers is used to lend to its borrowers, so it’s crucial that each credit union attracts enough savers to meet members’ demands. And the only way to do this is to pay an attractive dividend each year. Q Won’t it be hard to pay money in or take it out? A The RMT Credit Union takes savings and pays money directly in or out of your bank account, which makes access to your money easy. Bear in mind that credit unions are for savings and loans – they’re not a substitute for a current account. Q What if I have a complaint? A Like banks and building societies, credit unions must have clear internal procedures for dealing with complaints. And if you can’t resolve your problem with the credit union you can take your complaint to the Financial Ombudsman Service (FOS). Q Would I get a credit union statement each month? A No, you will not receive a statement each month, but you can access to your account on-line through the RMT web site link box Credit Union. If you do not have access to the web you can call the credit union and ask for a statement and one will be sent to you. G Join now – see inside back page for how to join 11 Secretary of the 16- strong Credit Union board of directors Simon Litchfield (right) says that for far too long working people have depended on commercial institutions and sometimes even more unsavoury money lenders for their financial needs. Our Credit Union has a dedicated team of volunteers and, at the moment, one full time paid employee. Nicky Hoarau (right) is the full time administrator. She says that the project will prove a great benefit to members, “but remember to send in the right documentation!” she said