Talking Credit Unions with Chris Smith

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Can credit unions truly be the gold standard of ethical finance? Join our enlightening exchange with ethics-man Barry Clavin, as we scrutinize whether these institutions are walking the talk of their cooperative principles. We traverse the complex terrain of credit union ethics, addressing their genuine commitment to these values, and the potential benefits of adopting a unified ethical identity. Are there any lessons to be learnt from landmark policy of the Cooperative Bank. Barry sheds light on the strategic advantages such alignment could offer, setting credit unions apart in a financial industry often marred by scepticism.

Step into the world of credit unions, where Louise Shields, at Claddagh Credit Union, describes the emotional bonds woven with members and community-centric values. She paints a vivid contrast to traditional banking models.

We explore the manifestation of Hey Credit Unions ethical values through the experienced lens of John Smith, and how it reflects a dedication to a wide array of stakeholders.

Mick McAteer's insights on economic and social justice underscore the importance of authentically presenting ethical standards to attract a diverse member base.

Rob Harrison explains how the Ethical Consumer Association sees credit unions and emphasises the need to ensure the business is effective and efficient (to its customers or members) as well as considering an ethical dimension.

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]

Listen to a conversation with George Hofheimer, the advisor and author of "Banking on the Human Scale." As we navigate the challenges that credit unions face in the digital era, George illuminates the path ahead, offering strategic insight into blending technological investments with the human service that defines credit unions. The traditional face-to-face service is not lost, but rather enhanced as George makes a compelling case for a harmonious merge of the old and the new. This conversation is an essential precursor to the upcoming Manchester Swoboda Credit Union Conference, in November, that aims to unravel the challenge of credit unions and their digital appetite.

At the Swoboda Credit Union Conference, George Hofheimer shares his wisdom, this time focusing on simplifying operations in the digital era. George expounds on how credit unions can prioritise investments and redefine senior recruitment in the digital age. The digital transformation, laden with complexities, becomes less daunting as George guides us through. George gives us a taste on this digital landscape while retaining that unique human touch.

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]

Several responses to this question by credit union leaders:

*Rate tart is a term used in banking to describe someone who transfers balances repeatedly, chasing the best possible interest rates on savings.

David McAuley, CEO, Donore CU, Ireland " Are our members 'rate tarts'* and leave the credit union, if we pay insufficient dividend? Our members in the main are not big savers.  So, while there will be one or two members disgruntled with no dividend and they do tend to be in the “older” category and not borrowing. For the last few years due to the prevailing low interest (or zero rate interest situation), there has been no clamour for dividends.  Also, the CBI has “encouraged” CUs not to give dividends.  This year some CUs have distributed but they have needed to justify that decision".

Karen Farrow, Chief Officer, Just CU, England "Historically, we have always paid a min 2% dividend and used to be very proud of this. We were also worried that if we didn't pay it that members would leave and take their shares with them. However about 3 years ago, we changed this and since then have paid nil/low or capped dividend - we have seen virtually no detriment to the share balance". 

John Smith, Governance Officer, HEYCU, England  "Are our members 'rate tarts'* and leave the credit union, if we pay insufficient dividend?  In our experience here at HEY Credit Union, that doesn't appear to be the case at all.  It would seem that very few of our members are saving with us because of the return, and more likely that other factors are the prime motivators, such as trust and safety (just want somewhere they trust to look after their money), ability to access funds without fuss, our customer care standards (they feel we look after them), habit, desire to support a local community enterprise, co-operative values, and perhaps lack of awareness of alternatives".

Christine Moore, CEO, Manchester CU, England "No, I don’t think many of our members are ‘rate tarts’, in fact I think the contrary is true. Some people who joined specifically for the Gold Saver a few years ago did take their money out when it closed (less than half). A focus group of savers we spoke to in 2018 overwhelmingly agreed they were not interested in the rate but glad their money was being used for good and to help other people (very heart-warming to hear!)".

Michael Byrne, CEO, Core Credit Union, Ireland  Are our members 'rate tarts' and leave the credit union, if we pay insufficient dividend? The vast majority of members are not. Reality is most members have modest savings which wouldn’t attract much interest no matter where they are held. A small number (but do hold proportionally more of the savings) would be rate sensitive and will be looking for a return. I would estimate that less than 5%of savings would be at risk of moving for better rates.

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]

Paul Jones and Nick Money update us on the wide list of projects, papers and conferences coming up in the next 12 months at the Swoboda Research Centre.

Hear about:

• New credit union lending projects
• Sustainable credit unions
• Updates on the Governance Manual
• New faces at Swoboda
• Jonathon Moore's views on credit unions

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]

Paul Jones and Nick Money update us on the wide list of projects, papers and conferences coming up in the next 12 months at the Swoboda Research Centre.

Hear about:

• New credit union lending projects
• Sustainable credit unions
• Updates on the Governance Manual
• New faces at Swoboda
• Jonathon Moore's views on credit unions

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]

This podcast captures the views of some financial services industry commentators on the merits and drawbacks of ESAS (Employee Salary Advance Schemes).

Guests on this podcast are:

1. Matt Bland, CEO Co-op Credit Union, UK
2. Emily Trant, head of Impact & Inclusion, Wagestream
3. Lindsay Melvin, CEO Flexiwage
4. Erik Porter, Wellbeing expert

How a Employee Salary Advance Scheme works:
Specialist scheme operators, which are usually unregulated businesses, often provide the product as part of a 'wellbeing package' to help employees with financial management. Some offer employees an app based platform which sits between the employer’s payroll operations and the employee’s bank account. The employee can then a draw down usually up to half of their accrued or earned wages before their next pay day. The scheme operators usually charge the employee a fee for each drawdown. The employer will then pay the balance of the salary (i.e. net of the advanced payments and the fees for the service) on the next payday. Employees can make multiple drawdowns during each pay cycle and can repeat this again in subsequent periods.

For many employees who do not have major debt problems, an ESAS (Employee Salary Advance Scheme) may be helpful where for a variety of reasons they need to quickly access some of their salary early. 

However, for employees with limited options, there are potential risks. Set out below are ways in which employers and scheme operators could mitigate some of these risks.   

• Scheme operators could highlight, on the employee section of their websites or where they provide an app, that where the employee has underlying financial problems that a salary advance may not in itself be sufficient to resolve such issues and suggest that they seek financial help from a debt advice charity.
• Employers, when introducing their staff to such schemes, could similarly highlight the limitations of a salary advance and suggest that if the employee needs debt help or access to more holistic financial advice, they could signpost them to the Money Advice Service website. They could also provide contact details of debt charities, such as Citizens Advice and Stepchange.
• Bringing the above to the attention of employees may be particularly important where the employer and scheme operator become aware that individual employees are drawing down salary under the scheme on a frequent basis. 
• Employees could be provided with periodic notifications where there is an accumulation of transaction charges.
• Similarly, scheme providers could develop systems that monitors the pattern of usage of individual employees. Where there is a pattern of repeat use which may be a sign of financial difficulties, then this could trigger alerts that might provide guidance and signpost the employee to organisations that provide free debt advice.

The FSA says: The risks for employees and employers are:
While the product has benefits, it is important that employees and employers are aware that there may be some risks in using these schemes.

• Lack of credit regulation. The regulatory and statutory rights and protections, from which borrowers under consumer credit agreements benefit, do not apply, as ESAS usually operate outside of credit regulation. For example, ESAS providers have no obligation to check affordability. Therefore, employees will need to satisfy themselves that they will have enough money on payday to pay other expenses they may incur at that time (for example their mortgage or rent payments), when they receive the balance of their salary. The high-cost short-term credit (HCSTC) pri

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]

This podcast captures the views of some financial services industry commentators on the merits and drawbacks of ESAS (Employee Salary Advance Schemes).

Guests on this podcast are:

1. Matt Bland, CEO Co-op Credit Union, UK
2. Emily Trant, head of Impact & Inclusion, Wagestream
3. Lindsay Melvin, CEO Flexiwage
4. Erik Porter, Wellbeing expert

How a Employee Salary Advance Scheme works:
Specialist scheme operators, which are usually unregulated businesses, often provide the product as part of a 'wellbeing package' to help employees with financial management. Some offer employees an app based platform which sits between the employer’s payroll operations and the employee’s bank account. The employee can then a draw down usually up to half of their accrued or earned wages before their next pay day. The scheme operators usually charge the employee a fee for each drawdown. The employer will then pay the balance of the salary (i.e. net of the advanced payments and the fees for the service) on the next payday. Employees can make multiple drawdowns during each pay cycle and can repeat this again in subsequent periods.

For many employees who do not have major debt problems, an ESAS (Employee Salary Advance Scheme) may be helpful where for a variety of reasons they need to quickly access some of their salary early. 

However, for employees with limited options, there are potential risks. Set out below are ways in which employers and scheme operators could mitigate some of these risks.   

• Scheme operators could highlight, on the employee section of their websites or where they provide an app, that where the employee has underlying financial problems that a salary advance may not in itself be sufficient to resolve such issues and suggest that they seek financial help from a debt advice charity.
• Employers, when introducing their staff to such schemes, could similarly highlight the limitations of a salary advance and suggest that if the employee needs debt help or access to more holistic financial advice, they could signpost them to the Money Advice Service website. They could also provide contact details of debt charities, such as Citizens Advice and Stepchange.
• Bringing the above to the attention of employees may be particularly important where the employer and scheme operator become aware that individual employees are drawing down salary under the scheme on a frequent basis. 
• Employees could be provided with periodic notifications where there is an accumulation of transaction charges.
• Similarly, scheme providers could develop systems that monitors the pattern of usage of individual employees. Where there is a pattern of repeat use which may be a sign of financial difficulties, then this could trigger alerts that might provide guidance and signpost the employee to organisations that provide free debt advice.

The FSA says: The risks for employees and employers are:
While the product has benefits, it is important that employees and employers are aware that there may be some risks in using these schemes.

• Lack of credit regulation. The regulatory and statutory rights and protections, from which borrowers under consumer credit agreements benefit, do not apply, as ESAS usually operate outside of credit regulation. For example, ESAS providers have no obligation to check affordability. Therefore, employees will need to satisfy themselves that they will have enough money on payday to pay other expenses they may incur at that time (for example their mortgage or rent payments), when they receive the balance of their salary. The high-cost short-term credit (HCSTC) pri

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]

The past two years has been the ultimate stress test for the financial, operational, competitive, and cultural resiliency of credit unions. Leaders have greater depth of insight into the risks facing their credit union and can now better plan for and address those risks, allowing the organisation to focus primarily on longer-term opportunities.

Some credit unions are only now emerging from the lockdown to seek new members in a tremendously competitive and digital world. The economic challenges of the past two years have amplified the essential role credit unions can play in the lives of their members and communities. This environment presents the opportunity for credit unions to re-think not only their operating norms but also how to position the organisation to make an even greater impact on employees, members, and communities.

Listen to the views of:

• Dave McAuley, CEO Donore Credit Union, Dublin, Ireland donorecu.ie
• Dermott O'Neill, CEO Scottish League of Credit Unions  scottishcu.org
• Robert Kelly, CEO Association of British Credit Unions Ltd.  abcul.coop
• Anthony Morrow, Founder of OpenMoney  open-money.co.uk

Send your feedback to Chris Smith at [email protected] 

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]

The past two years has been the ultimate stress test for the financial, operational, competitive, and cultural resiliency of credit unions. Leaders have greater depth of insight into the risks facing their credit union and can now better plan for and address those risks, allowing the organisation to focus primarily on longer-term opportunities.

Some credit unions are only now emerging from the lockdown to seek new members in a tremendously competitive and digital world. The economic challenges of the past two years have amplified the essential role credit unions can play in the lives of their members and communities. This environment presents the opportunity for credit unions to re-think not only their operating norms but also how to position the organisation to make an even greater impact on employees, members, and communities.

Listen to the views of:

• Dave McAuley, CEO Donore Credit Union, Dublin, Ireland donorecu.ie
• Dermott O'Neill, CEO Scottish League of Credit Unions  scottishcu.org
• Robert Kelly, CEO Association of British Credit Unions Ltd.  abcul.coop
• Anthony Morrow, Founder of OpenMoney  open-money.co.uk

Send your feedback to Chris Smith at [email protected] 

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]

This summer saw the publication 'Gambling, Vulnerability and FCA Compliance'  (How financial services firms can achieve the best outcomes for vulnerable customers who gamble), by Sharon Collard and Katie Cross at the Bristol University Personal Finance Research Centre.
 
Credit unions are seeing increased levels of gambling activity on members accounts, especially since the pandemic. Many credit unions can conduct more forensic assessment of members accounts following the uptake in use of 'open banking'. This has contributed to a rising concern that gambling is causing harm to members and their families. Should the credit unions intervene, or should they mind their own business? Listen to the excellent points of view from industry leaders on this podcast.

Sharon Collard states, at a conservative estimate, at least one in ten adults in Britain (and I guess similar numbers in Ireland too) experience harmful gambling, either because of their own gambling or someone else’s. Gambling-related vulnerability can present a unique set of challenges because of its complexity, the fact is that the member may not be fully in control of their decisions or actions, and the fact is that it may not always be clear what a credit union can do to ensure the fair treatment of customers in this situation.
 
Do credit unions intervene, or not seems to be the conundrum? I think what we have heard, on this podcast, demonstrates that credit unions are well-placed to address the financial harms linked to gambling-related vulnerability. Some, credit unions are embarking on being quite interventionist and perhaps others less so. Perhaps credit unions can demonstrate their differences, from their competitors, by showing a more caring and concerned response to this growing problem in society. Or maybe our governments will curb the gambling companies and restrict the proliferation of their advertising; but I wouldn't bet on it.

Listen to the contributors to this podcast:

1. Sharon Collard, Bristol University
2. Karen Bennett CBE,  CEO Enterprise Credit Union, Merseyside
3. Sheenagh Young, CEO South Manchester Credit Union
4. Alex Hodson, Loans Officer, Metro Money Wise Credit Union, Rochdale
5.  Lorraine Moran, Loans Officer, St Anthony’s & Claddagh Credit Union, Galway
6. Barry Grant, Project Manager, Extern Problem Gambling Project, Dublin

Gambling-vulnerability-FCA-compliance-report.pdf (bristol.ac.uk)http://www.bristol.ac.uk/media-library/sites/geography/pfrc/Gambling-vulnerability-FCA-compliance-report.pdf

Talking Credit Unions with Chris Smith is a regular podcast dedicated to informing credit union practitioners, leaders and opinion formers on variety of industry topics. To contact Chris Smith, [email protected]