Dot ComUnity Credit Union - ISA

masonic

Looking back over this company's shady history, it is amazing that it is being allowed to stagger on.

So we start off with ECBU, who messes up and gets an FSA supervisory notice in September 2011 as they believe it is failing.

At some point after that they rebrand as DotComUnity and in 2014 launch an 'almost too good to be true' ISA paying a market leading rate of interest. By 2015, they were back in hot water with the regulator, now the PRA.

The PRA was initially worried that it had grown too fast and did not meet the capital reserve requirements organisations that now apply because of its size, but it seems it then became worried about the accounts it had on offer and that it was misrepresenting itself by offering accounts that look and feel too much like normal savings products. In short, it had become an unwitting Ponzi scheme that would not be able to meet its obligations going forward and so the credit union has probably been forced into changing the products it offers to dividend bearing shares going forward. As others have rightly pointed out, those dividends are variable and can be zero during times that the business is under stress (such as it will be for the foreseeable future).

So what was DotComUnity's answer to these serious problems? Well a name change, obviously! So, welcome to ECBU (II), replete with zombie accounts, trapped customers, and a regulator that seems, if anything, to be exacerbating the situation.

gwapenut

I think it's worth reminding everyone that we "have absolutely no concerns here".

I believe that within 3 months of this post Rob was acting as CEO.

DotComUnity wrote: »

Good Evening,

You have absolutely no concerns here.

Enterprise The Business Credit Union (EBCU) was set up to provide members of the Federation of Small Businesses with their own Credit Union, based up in Morecambe.

Through its duration, there was significant mis-management and issues arising, leading to the issues in 2011.

During this time, DotComUnity, in its original entity was looking to setup a Credit Union to support the Disability Sector, based in Poole, Dorset.

DotComUnity was signposted in the direction of EBCU, and was put in a position to restrucutre the Board of Directors, and relocate the operations to Bournemouth, Dorset.

Throughout the past 12 - 18 months, DotCOmUnity has been setting out the Marketing, Branding, Banking Platform, IT Infrastrcuture, and ultimately developing the sustainable business model that we are moving well into today.

The past 6 months have seen membership, shares and loans exceeding 400% increases, rapidly making us one of the fastest growing Credit Unions in the UK, whilst building a safe and secure centralized infrastructure that you would want to trust your money with.

Hope this helps clear up.

Kind Regards

Rob

jimjames

masonic wrote: »

At some point after that they rebrand as DotComUnity and in 2014 launch an 'almost too good to be true' ISA paying a market leading rate of interest. By 2015, they were back in hot water with the regulator, now the PRA.

What seems strange is how a bank or credit union is able to offer such a market leading rate, consequently get into difficulties and then, as seems likely, have fscs pick up the pieces, all paid for by customers of banks that have been prudent. I can see why the boards of other organisations can see that as being unfair.

Maybe the number of customers affected is small but I'm surprised this story hasn't been picked by any media yet as it seems to go completely against what the fscs advertising claims to do.

"We protect your money if your bank or credit union goes bust" but you might not be able to get your money if we try to keep them afloat.

neil324

jimjames wrote: »

What seems strange is how a bank or credit union is able to offer such a market leading rate, consequently get into difficulties and then, as seems likely, have fscs pick up the pieces, all paid for by customers of banks that have been prudent. I can see why the boards of other organisations can see that as being unfair.

Maybe the number of customers affected is small but I'm surprised this story hasn't been picked by any media yet as it seems to go completely against what the fscs advertising claims to do.

"We protect your money if your bank or credit union goes bust" but you might not be able to get your money if we try to keep them afloat.

Light touch regulation? Which is a government issue.

Peperami

I'm so glad I was in the middle of a 2yr fixed ISA with Santander when I applied for the Dotcom one so only invested £15000 rather than being able to transfer the many years I have been saving in ISAs.


£15k is bad enough to be held ransom on. I really feel for the poor people who transferred in.


I've yet to contact them to register my intent to 'try' and get my money transferred to another provider on maturity. It's unbelievable they make no reference in the recent letter to the fact you can't actually do this at the moment.

Steve_xx

jimjames wrote: »

What seems strange is how a bank or credit union is able to offer such a market leading rate, consequently get into difficulties and then, as seems likely, have fscs pick up the pieces, all paid for by customers of banks that have been prudent. I can see why the boards of other organisations can see that as being unfair.

It's not quite like that. THe FSCS will pick up the pieces in the end, hopefully. But there may be still some cash in DotComs coffers and if they've loaned it out there'll be an income stream from that if they've lent out prudently. So in the end the FSCS wont have to stand the full amount of the potential loss.

MARTYM8`

Steve_xx wrote: »

It's not quite like that. THe FSCS will pick up the pieces in the end, hopefully. But there may be still some cash in DotComs coffers and if they've loaned it out there'll be an income stream from that if they've lent out prudently. So in the end the FSCS wont have to stand the full amount of the potential loss.

I did see these figures posted based on their results to 30 Sept 2014 - I presume they are audited? As at 30 Sept they had £4.3m of deposits (mostly ISA funds I would assume) and £3m of outstanding loans. Given they tend to loan to vulnerable people/carers/ clients with physical learning disabilities to buy equipment etc I am not clear how their repayment terms work or how long term those loans are or how prime they are.

I think this is perhaps the saddest thing about all this - putting aside our money - as this credit union primarily exists to support people with physical and learning disabilities and their carers. Most of us on here probably have sizeable sums invested with them - but hopefully have other savings/investments we can call on - but many of their smaller depositors will be from this sector.

I sort of wonder how the directors - given what happened in 2011 and now again - can sleep at night given who the credit union exists primarily to assist!


"Banking Summary

During the period to 31st March 2014 member deposits and ISA's have increased from £157,000 to £1,279,000. In the same period outstanding loans have risen from £46,750 to £881,000.

Since 31st March deposits including ISA's have already grown to £4,250,000 and loans have risen to £2,994,000. New loan requests currently running at approximately £600,000 month increasing by approximately 25% per month."

gwapenut

As at 30 Sept they had £4.3m of deposits (mostly ISA funds I would assume) and £3m of outstanding loans

But that backs up that they're not insolvent - it's merely a reserves ratios problem inflicted on them by the PRA?

MARTYM8`

gwapenut wrote: »

But that backs up that they're not insolvent - it's merely a reserves ratios problem inflicted on them by the PRA?

I agree on face value - what what happens when the voluntary restrictions are raised. That £4.3m could drop very rapidly very quickly.

From my initial analysis of comments made here and elsewhere nearly 3% of their entire deposit base is held by just 3 MSE posters! So just a few people transferring out could deplete this very quickly.

gwapenut

Completely agree MartyM8 however my gut feeling is that if the PRA themselves hadn't put these restrictions in place, and DCU had offered a decent 2% guaranteed interest at renewal for a 1 year term with no mid-year hysteria, then enough ISAs would have been stayed with DCU for there not to be a problem.

I blame the PRA first, but given the situation we are in, I dislike how DCU have dealt with it.