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Dot ComUnity Credit Union - ISA

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  • Porcupine
    Porcupine Posts: 682 Forumite
    I'm not 100% sure on what happened with the interventions that the FSA took between Sept 2011 and Jan 2012. I'm happy to put the question to one of the Directors and pop a response back on later in the week.

    Pinging DotComUnity, did you manage to find out what happened during the FSA interventions?
  • Archi_Bald
    Archi_Bald Posts: 9,681 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    Porcupine wrote: »
    Pinging DotComUnity, did you manage to find out what happened during the FSA interventions?

    Does it matter? Nobody on MSE has been pinging RBS or HBOS or Virgin Money (on behalf of Northern Rock) or Dunfermline Building Society or Glenard Credit Union or any of the others that failed - so why haunt DCU? I'd much rather they spent their energy on dealing with all the deposits they are getting today than with rolling up historical events.
  • Porcupine
    Porcupine Posts: 682 Forumite
    What I'm trying to do is understand what happens when a credit union is under stress.

    When Northern Rock was under stress, it was headlines on the news, and there was a lot of political pressure to do something. Likewise Icesave, RBS, etc. This got sorted out fast.

    When smaller regulated businesses are under stress (like individual financial advisers or small investment firms), all we might see is a few letters to national newspapers. There's no political pressure to do anything, so nothing happens fast. This is what happened in the Equitable Life case - the government said 'meh' and couldn't be bothered to kick enough backsides to make something happen, because it wasn't such a hot political issue at the time. Cue years of wrangling.

    Obviously, the endgame is: institution goes bankrupt, invoke FSCS, get cash back (hopefully fast). That's the backstop, and a guarantee we ultimately rely on.

    But what happens if the institution doesn't go bankrupt but gets into some kind of difficulties? It isn't bankrupt so the FSCS doesn't apply. That the FSA/FCA can cause them to not pay out deposits until their house in order is, in my opinion, a significant risk to liquidity, and a risk I'm trying to quantify.

    That said, it could be worth viewing this risk like investment liquidity: sometimes there are times when you really shouldn't (or can't) sell your shares and that's something you readily accept. So maybe it's less of a concern for a long-term 3/5 year deposit, but is still more of a consideration for a 1 year account.

    Also what happens if the credit union says 'we promised 3%, we couldn't afford it, have 0.1% instead' and the FCA says 'be grateful for 0.1% because it would have gone under otherwise'. There's nowhere to appeal the FCA's decisions.

    In other words, there are more scenarios beyond invoking the FSCS and getting your money back, which is what I'm trying to understand. It seems like DCU/EBCU has already gone through one of these periods which was why I was enquiring as to what happened.

    I'd not heard of Glenard Credit Union, thanks, will have a read.
  • Thought it was okay to go ahead but not so sure after reading your post Porcupine. Is it relevant that DEAC (Dorset Energy Advice Centre) which is a not-for-profit organisation that installs energy efficiency measures says "To enable its clients to have a choice of funding the installations, DEAC have created a branch of DotComUnity as a Credit Union through which it can now offer a DEAC loan." I don't know enough about finances to know whether this is relevant.
  • Porcupine
    Porcupine Posts: 682 Forumite
    edited 1 July 2014 at 6:49PM
    Umberleigh, my personal view at the moment is that it's OK with a few conditions. This is my view alone, it's worth exactly what you paid for it (ie nothing).

    To start with, I'm not worried about actually losing the capital: the FSCS is a pretty good backstop for that. It's mostly about withdrawals and payment of interest, and giving yourself a bit of flexibility to deal with anything that might happen.

    My first condition is don't put all your money into it: eggs-in-one-basket applies here as everywhere else.

    Another is that you're prepared to put up with a period when you have no access: if things go wrong there may be a period when you can't withdraw. It's a fixed rate account after all, so we should be used to a no-withdrawals policy during the term. I'd just not time it so the end of the fixed rate is a time you have a hard obligation to meet, like missing a mortgage payment that means you'd be on the street.

    The last is that you regard the interest as not absolutely guaranteed: while there's a very good chance of being paid, I wouldn't do it if there was a hard requirement (eg you were trying to live off the interest, and a drop in income meant you'd starve).

    So in other words, give yourself a backup plan in case anything happens. It probably won't, but make sure you're not left high and dry if it does. Belt and braces and all that.
  • hgt
    hgt Posts: 341 Forumite
    Part of the Furniture 100 Posts
    Umberleigh wrote: »
    Thought it was okay to go ahead but not so sure after reading your post Porcupine. Is it relevant that DEAC (Dorset Energy Advice Centre) which is a not-for-profit organisation that installs energy efficiency measures says "To enable its clients to have a choice of funding the installations, DEAC have created a branch of DotComUnity as a Credit Union through which it can now offer a DEAC loan." I don't know enough about finances to know whether this is relevant.

    I believe DotComUnity have a scheme whereby organisations can act as a branch for them. So I think that's all this means. In fact as far as I'm concerned it's a good thing as in my opinion the more people who save / borrow with DotComUnity - the more it helps them grow and (hopefully) become more stable.
  • Steve_xx
    Steve_xx Posts: 6,979 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    hgt wrote: »
    I believe DotComUnity have a scheme whereby organisations can act as a branch for them. So I think that's all this means. In fact as far as I'm concerned it's a good thing as in my opinion the more people who save / borrow with DotComUnity - the more it helps them grow and (hopefully) become more stable.
    What you say is largely true. However, it is a relatively small outfit by the sounds of things and so it is easy to see how a sudden influx of money might actually upset their business model in the short to medium term. Should they become awash with cash they might venture recklessly like the banks did. That would be disasterous for them as an entity.

    It's a very interesting proposition and I'd like to see it working well for a year or two really.
  • ceredigion
    ceredigion Posts: 3,709 Forumite
    Eighth Anniversary 1,000 Posts Photogenic
    Does any body know if they have withdrawn their offerings or is there just a failure to sort their computer systems out.
  • Archi_Bald
    Archi_Bald Posts: 9,681 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    From their site:
    We're just updating our ISA pages - Keep an eye on what is available.

    In the meantime, for information please call us on the telephone number in the top right corner of the page.

    I don't know how long this notice has been up, but they seem to definitely be working on their site. Yesterday I could see their JISA and their 3 and 5 year ISAs. Today there's just the above notice.

    I have topped mine up to £15K on July 1 and they sent me an up to date ISA statement in the post since.
  • codetown
    codetown Posts: 685 Forumite
    Archi_Bald wrote: »
    From their site:



    I don't know how long this notice has been up, but they seem to definitely be working on their site. Yesterday I could see their JISA and their 3 and 5 year ISAs. Today there's just the above notice.
    .

    This section has been "offline" (formally under construction) at least from the 2 July (evening) to today 7 July. I find this extremely unprofessional at very least. There was no reason to put up an under construction page until the new page was ready to be put online..

    This, added to the lack on answers to email communication, is pushing me out when I was ready to put quite a bit of money on their accounts...
This discussion has been closed.
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