IT HAS been a long and difficult journey for the Churches Mutual Credit Union (CMCU) since the idea of a member-owned financial institution for Church of England clergy was first floated in 2007. But, as the CMCU has just completed its first full financial year as a trading company, it seems that the patience of those behind it has paid off.
The CMCU — along with the Archbishop of Canterbury’s Task Group on Responsible Credit and Savings — is trying to shake off the image of credit unions as the “poor man’s bank”, wanting them, instead, to be regarded as a mainstream alternative to high-street banks and building societies.
Credit unions are required to have a “common bond”, something that unites the body’s membership. In many cases, this is geographical, as credit unions are open to people living within a local-authority area. But there is an increasing number of credit unions that are targeting employment sectors or other social-interest groups.
The CMCU’s “common bond” requires its members to be clergy, or employees of certain churches or associated charities. Initially, this was open only to those within the Church of England; but, by the time it was launched, membership had been extended to those in the Church in Wales, the Scottish Episcopal Church, the Church of Scotland, and the Methodist Church. In July, the United Reformed Church came in.
Besides clergy and lay ministers, the bond includes people who hold recognised positions within the Churches: such as PCC members, churchwardens, or trustees of church-related charities.
The original plan had been to include congregation members within the common bond, but this proved to be a step too far for regulators, who said that such a move would be a breach of the Equalities Act. There is also a question about how church membership is defined, as each denomination applies different criteria.
The current common bond covers “people in a position of responsibility, either paid or unpaid” in the member denominations. This gives the CMCU a potential membership in excess of 100,000 people.
ON ITS website, the CMCU says that it still harbours ambitions to extend its common bond, saying: “In due course, the intention is to extend membership . . . to all active church members.” But it is something that its chief executive, Hilary Sams, is in no rush to achieve.
“It is something that it is still in the heart of the board,” she says. “It’s not about building an empire, but it is about people in the Church having access to the financial service we provide. We have to pick our battles; and if you are going to go into battle you have to be ready for it; so it is something for the future.”
“It would be a fight to persuade the Financial Conduct Authority to change its ruling,” she says; and the efforts of the CMCU currently need to be elsewhere. She is equally concerned that the CMCU should not grow too big, too quickly.
It offers a range of savings and loan products, including car loans for clergy. This is something that it has taken over from the Church Commissioners, and it provoked a “panicked” response in some of the clergy, who struggled to cope with the change.
“We offer a very competitive rate,” Ms Sams says. “We are cheaper than the Church Commissioners. . . You may be able to get a cheaper rate from your bank, but the big difference from the credit union is that we actually tell you what the rate will be before you apply, whereas, with your bank, you have to apply and run the risk that they may not offer you a loan at their cheapest rate.”
Some clergy, she says, had declined an invitation to apply for a car loan because their bank was advertising loans at 3.9 per cent; but after the bank had carried out credit checks — searches recorded by credit reference agencies — the clergy involved had been offered loans at 6.8 per cent.
The CMCU charges interest of 4.9 per cent for loans of up to £10,000, dropping to 4.5 per cent for the next tier, covering loans of up to £15,000. “The rate we advertise is the rate that we offer a loan at. We don’t think ‘Oh, you’re a poor risk; so we’ll bump the interest rate up.’”
AS AN authorised financial institution, the CMCU has to carry out credit checks, too, before loans can be offered (unlike the Church Commissioners); but this does not mean that loans are routinely refused. “We very rarely turn people down. . . We are not a ‘computer-says-no’ type organisation, because we weigh everything up on affordability,” Ms Sams says.
For Christians, being in debt is often a hidden burden — more so than in the secular world, she says. “For somebody who is in ministry, in leadership, to say that, for various circumstances, their credit rating isn’t good — that they have got high-cost loans, or credit cards that are unmanageable — there is a deep sense of, maybe, shame which there isn’t in general society. I think debt is still one of the real no-nos.”
Before the CMCU was launched, it considered offering debt-consolidation loans as a product, but decided against it, thinking that it wouldn’t be needed. It now offers such a product, and agreed such a loan just one month after it started lending.
“Almost immediately, we were having people approach us for debt consolidation. These are people for whom various things have happened: illness, family crisis. Some people are having to bail out members of their family, and are getting into debt themselves because of that.” The CMCU’s loan-restructuring product currently accounts for about 12 per cent of the credit union’s loan business.
CREDIT unions are not, of course, just about loans, but about savings. If a credit union did not have any savers, it would not have any funds to lend. As it approached the end of its first full year of trading at the end of September, the CMCU had some £1.9 million pounds invested in it, about 80 per cent of which had been loaned out.
Ms Sams believes that this is a “sustainable” level, and that the CMCU has a “good, well-behaved loan book”, with no bad debt.
Savings come from individual savers, as well as corporate bodies such as PCCs and charities. The Government’s Financial Services Compensation Scheme, introduced after the banking collapse, protects savers’ investments, but only up to £75,000 in each financial institution.
The CMCU does not pay interest, but pays dividends to savers. Once its accounts have been audited, it expects to be able to offer a one-per-cent dividend on lump sums above £2000, and 0.75 per cent on smaller sums, making it competitive with many high-street banks. A credit union offers an added benefit: the nature of the CMCU’s common bond means that savers’ money may be being used to help individuals known to other savers — something that makes investing with the CMCU an ethical option.
”There are very few places where you can invest money and actually guarantee an income from it now. You can’t do that with savings these days. . . So what individuals and organisations are now looking at is: ‘What is our money doing when it is out there in a bank, in an investment?’
“We are up front about it. We are a lending institution. You could have a situation where a PCC puts £10,000 in a credit union, and the vicar has a car loan for £10,000, and is actually driving around in the money that the PCC has invested.
“The PCC won’t know that the vicar has had a car loan, but that is what the money is doing. It is enabling somebody else’s ministry.
That idea of money going around in a circle, and being a mutual benefit to saver and borrower, is central to credit unions.”
For the immediate future, the CMCU is seeking to expand its client base using its existing common bond by targeting diocesan offices, cathedrals, and church charities to recruit savers and borrowers who may not yet know that they are eligible for CMCU membership.