Church Credit Union Plans Q&A
Updated: 10:52am UK, Thursday 25 July 2013
:: What is a credit union?
A credit union is essentially a co-operative whose members pool their savings to provide credit at a low interest rate. Members may live in the same community, work together or belong to the same organisation. Consumer group Which? estimates there are now around 450 credit unions in Britain. Around 950,000 people are members, according to the Association of British Credit Unions (ABCU). Rules regarding membership were relaxed in January 2012, allowing organisations as well as individuals to sign up.
:: How safe are savings invested in a credit union?
Just like savings accounts offered by high street banks and building societies, accounts offered by credit unions are protected up to £85,000 per person through the Financial Services Compensation Scheme (FSCS).
:: Are loans offered by credit unions more affordable?
Interest rates vary but according to the ABCU they can be as little as 1% per month (12.7% APR). It means a £1,000 loan paid back over 12 months would incur around £70 in interest charges. By contrast, paying back a one-year, £1,000 loan from a high street bank at a typical 29.9% APR would cost around £170.
:: What is the Church of England proposing?
The proposed Anglican Mutual Credit Union (AMCU) would allow clergy, ordinals, licensed lay ministers and employees or trustees of Anglican churches and charities to become members. People living in the same household as existing members would be able to join, as would Anglican churches and charities based in Britain.
:: Why does the church believe a credit union is needed?
Its website says the credit union model is "increasingly recognised as a more responsible and ethical form" of lending. It adds: "The subsequent banking crisis and the increasing understanding that the Church of England's financial resources are limited, underlined the need to assist clergy in taking personal responsibility for their finances and to help them plan for both living on a stipend and future retirement."
:: What sort of services would the credit union provide?
The AMCU would offer savings accounts, including cash ISAs, as well as loans for the purchase of cars, the consolidation of existing debts and the purchase of retirement houses or flats.
:: How far advanced are the plans?
The idea for a church credit union came about in 2008 at the height of the financial crisis. Those behind the project have applied for start-up funding and are waiting to hear whether the scheme has been approved by the Financial Services Authority. They hope to launch the scheme in autumn 2014, four years after a business plan was originally drawn up.
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