Project Credit Union - Day 4

I don’t know whether it was just because it was Friday, but it was a bit of an uphill struggle. A more likely reason is that we spent too much time immersed in a labyrinth of poorly constructed websites, MS Word documents and legalese.

We were also a man down for the morning, because Chris was stuck at home waiting for a plumber and we decided it would be more sensible for him to continue working on migrating our Linode VPS.

Anyway, although we’re going to continue to chronicle our research in these blog posts, we decided it would be useful to create a Credit Union wiki (yay!) to record a snapshot of our latest understanding. The idea is that the wiki ought to provide a better reference for other people interested in setting up a credit union.

UKCU

We had a very helpful email exchange with a woman at UKCU, although the answers were slightly depressing. Here are some of the things we learnt:

Minimum capital

We were a bit surprised to learn that the PRA require a credit union to have minimum initial capital of £10K. It’s not obvious to us what purpose this requirement serves.

Initial membership

A credit union needs 21 people to sign up as members in the initial application. I’d previously noticed this in a section of the Application Form Appendix (doc), but had forgotten about it.

Unavoidable costs

A bit more of an idea of the unavoidable costs of starting and running a credit union. Interestingly one of the biggest costs mentioned is for software licenses and ongoing maintenance agreements. This might at least partly explain the minimum initial capital requirement.

How long?

Some idea of how long it might take to set up a credit union and why it takes that long. The most commonly quoted figure is 2 years, but UKCA say between 9 months and 2 years. It seems as if the majority of the time is likely to be taken up with:

• getting the application together (business plan, organisational chart, policies and manuals, etc)
• waiting for the application to be processed (probably a matter of months)
• and with things like staff training

Roles

More information on the different roles within a credit union and the minimum number of people you need to fill them. It seems as if a single person can fulfill many roles, but the Supervisory Committee who perform the Internal Audit checks have to be separate from the Board in order to maintain their independence.

I later found confirmation of this in point 3 in the Compliance & Continuity section of the ABCUL Code of Governance for Credit Unions.

London Community Credit Union

Given the JavaScript hacking I’d had to do to get my application submitted, I was pleased to hear that my application to the London Community CU had been successful and that they were sending me a welcome pack in the post.

Apparently I need to activate my account by depositing £10 either by phone or in person. It looks as if I automatically have two accounts: a Saver Plus account and an Instant Access account, although both are “under the same sort code and account number”. Neither of the accounts come with a card and so you have to go into a branch if you want to make a cash withdrawal.

If you want to have a card, you can open a Credit Union Current Account which gives you a “Cashcard” or a Visa Debit Card depending on your credit score. This account costs 75p per week (i.e. £3 per month) to run. I plan to apply for one of these to see how it works.

Other stuff

I remembered that a while back we talked to Josef Davies-Coates of United Diversity about creating a web application to make it easier to setup an Industrial & Provident Society. I think this was more aimed at the other (“benefit of the community”) type of I&PS and we didn’t end up working on the project. I wonder whether Josef got anywhere with this and whether it might help us if we do want to setup an I&PS.

Chris continued to read through the Credit Union application form and added some notes to the wiki.

Next steps

As some of the financial and bureaucratic hurdles became more apparent, we both started wondering whether it was sensible to continue pursuing the idea.

We chatted about it for quite some time and considered stopping, writing up where we’ve got to and explaining why we’ve stopped. In the end we decided against calling a halt to the project. Although the last couple of days had been a struggle, I think we both felt unable to clearly justify why we ought to give up.

The most obvious reason to stop is if we work out that the amount of time, energy and cash it’s going to take to setup a credit union is prohibitive. Although it’s not looking too promising on this front, it feels as if we ought to do some more popping of the why stack before we call it a day.