Run by a volunteer board of directors which are elected by its members, a Credit Union is basically a financial cooperative, owned and controlled by its members.
They offer affordable loans and encourage members to save. By law, the maximum a Credit Union can charge is 12.7% and this is charged on an ever reducing balance, which means that every week or month, you will pay less and less interest. There are no hidden charges and you will not be penalised for repaying the loan early.
Anyone can join a credit union, as long as they are part of the 'common bond'. This could be people living in a shared area, working for the same employer or belonging to the same association.
So how do you start your own credit union?
The average time it takes to establish a credit union is between one and three years. The minimum number of members required for the initial set up is 21 and the maximum number of members once you are established is limited to just 5,000 people.
After you have secured enough members to start your union, there are a number of tasks which will need to be completed.
?Firstly, decide on a common bond - where your credit union will operate
?Get a group together with the necessary range of skills and experience to develop a successful community business
?Carry out a pledge drive - find out just what demand there is for a credit union in the area you wish to service and use the information obtained to inform your business plan projections
?Join The Association of British Credit Unions (ABCUL) as a Study Group member - for just ?35 a year, you get a full manual and access to all of ABCUL's information services
?Discuss and research your plans with the regulators - The Financial Services Authority (FSA) will need to approve your common bond and satisfy itself that your business plan and policies and procedures meet its standards. The FSA website www.fsa.gov.uk gives the regulatory requirements Credit Unions now have to meet to safeguard member's money in the same way as banks and building societies
