Dot ComUnity Credit Union - ISA

Steve_xx

gwapenut wrote: »

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.

No, the PRA have a statutory duty and it is right that they have acted. On the other hand DotCom have failed miserably. They don't communicate to all. They don't communicate well and when they do it is not uniform. Whenever they do communicate they create ever more ambiguity. Their terms and conditions are utterly shambolic. They have stopped posting on here and this has done nothing to allay anyones fears for the worst possible outcome for them as an organisation. They clearly lack strategy and direction.

It will be interesting to see just what will happen if that PRA shackles come off, if and when they do. It's a catch 22 situation as I see it. Once the PRA shackles come off then DotCom, unless some way of regulating withrawals can be found/imposed, will be in a collapsed state.

This outfit isn't like a bank and so the situation can't be compared to the Iceland debacle, which acutally wasn't that bad. This thing is something quite new as I see it and it will be interesting to see how it pans out.

veryintrigued

colsten wrote: »

Seeing that people's posts are being removed in a rather clandestine manner, you might be overly optimistic about MSE's concerns for their users, many of whom have tens of thousands of pounds illegally withheld from them.

It never even occurred to me that MSE would do this when I set up the private group but I am glad I did now. I also never expected any help from MSE in the matter, and definitely do not now.

Agree its poor form posts being deleted - especially when they relate to such a pickle of a situation.

If I were caught up in this I'd be using every avenue I had to unloosen someone elses grip on my money. I'd certainly be contacting MSE and ask them about the post deletion funny business and also be asking if this case were something Martin would be interested in supporting.

MARTYM8`

Steve_xx wrote: »

No, the PRA have a statutory duty and it is right that they have acted. On the other hand DotCom have failed miserably.

While I agree about DotCon or is it EBCU now - I cannot say I am exactly impressed by the PRA. They have contributed to the problem by their approach and timing.

DotCon had regulatory issues in 2011 - so you might think they would be on a short leash and under close ongoing monitoring.

DotCon announces a market leading ISA and takes in huge deposits mostly on a one year fixed term in March 2014. Yet the PRA wait for 9 months - with millions deposited - and then decide to intervene on the basis they have issues with their capital ratios. Why did they wait so long to intervene with a body that had significant issues before?

A lot of DotCon's problem is that it has grown too fast too soon - and their directors don't seem to have the capacity or skills to service their client base. The PRA by contrast have far more capacity and refuse to engage with DotCon members when this issue is raised with them.

This could have been managed in an orderly way - but confidence is now totally undermined in this institution and no one wants to keep their funds with them a second longer. So we are in endless limbo without access to our funds - with the knowledge that as soon as the limbo ends there will be a run on the bank.

There is no incentive on the PRA or DotCon to force the issue or raise the restrictions - as the credit union will go under an trigger the FSCS payments. So its pass the parcel between DCU, the PRA, the FCA and the FSCS - how many quangos can we be expected to deal with?

So yes I am critical of the regulators - too late too late!

masonic

gwapenut wrote: »

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.

From my reading around the situation, the PRA's hand was forced (see below). We don't know the exact situation within ECBU (as they now like to be known) that precipitated the action by the PRA. What we do know is that >95% of ECBU's assets were out on loan or otherwise unavailable. Maybe it was 96%, or 98%, or 99.9%. So a very modest number of emergency withdrawals could have tipped them over the edge, and perhaps it was about to do so when the PRA stepped in. We'll probably never know.

Whatever caused the PRA to get interested in ECBU, what they found there, they would not have been able to ignore.

First, the Credit Union was offering to take deposits in exchange for interest, like a bank, which is in violation of the "Credit Unions Act 1979" [CUA 1979] (as amended by the "The Financial Services and Markets Act 2000 (Consequential Amendments and Transitional Provisions) (Credit Unions) Order 2002" [CATP 2002], which states:

8 General prohibition on deposit-taking.
(1)Subject to sections 9 and 10 below, a credit union shall not accept a deposit from any person except by way of subscription for its shares.

http://www.legislation.gov.uk/ukpga/1979/34/section/8

The later subsections are omitted by the CATP 2002. Section 9 refers to individuals too young to be members and Section 10 relates to loans from banks, so there is no provision for them to be accepting deposits in this way at all.

Faced with this breach of the CUA 1979, one solution for the PRA would be to ask ECBU to convert its deposits to interest bearing shares (i.e. shares that pay a known fixed rate of interest). However, in order to do this, the credit union would need to comply with the following conditions (specified in "The Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011" [TLR 2011]

19.—(1) After section 7, insert—
“Power to issue interest-bearing shares
7A.—(1) A credit union may issue interest-bearing shares if—
(a)its rules so provide;
(b)its most recent year end balance sheet shows that it holds reserves of at least £50,000 or five per cent of its total assets, whichever is greater;
..."

http://www.legislation.gov.uk/uksi/2011/2687/article/19/made

This is a modification to the earlier "Industrial and Provident Societies Act 1965". Section 7 deals with "Carrying on of banking by societies".

Hence, the union cannot take deposits in return for a known rate of interest until it files its next set of year end accounts (and these accounts show they still meet the necessary reserves). That leaves them only able to issue dividend bearing shares, for which the dividend is variable and not guaranteed.

Therefore I believe that ECBU had no legal basis to offer these accounts in the first place and the PRA could not allow them to continue doing so once it noticed what they were doing. Quite how it went unnoticed for so long is another question.

Archi_Bald

veryintrigued wrote: »

I'd certainly be contacting MSE and ask them about the post deletion funny business and also be asking if this case were something Martin would be interested in supporting.

That is one suggestion I for one will most definitely not follow. And I will certainly not publicise on here what actions I have taken, and will still be taking.

Porcupine

MARTYM8` wrote: »

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 think this is a key thing to remember here. This is not RBS, it's a tiny institution designed to help very vulnerable people.

So, while the situation is been a mess and they haven't been straight with people, we should be careful what we wish for. We should first and foremost stick up for those who are brought into a financial pickle by this situation, both savers and borrowers, especially those who can least afford it.

However, if you have substantial savings elsewhere and the loss of interest and access bothers you but won't cause you hardship, I would be careful about doing something that might make it very much worse for those vulnerable people. If there is a run and it causes DCU/EBCU to collapse that helps nobody, and those vulnerable people are those least equipped to deal with it.

So by all means put pressure on DCU and the PRA/FCA/FSCS, but be careful of pushing DCU over the edge.

Archi_Bald

If you feel strongly that this company needs and deserves propping up, you can invest in their 5-year bond. Of course there is no guarantee that you will ever get a penny of your money back but at least you will have helped those people who you say would be affected.

I for one do not see it as my role to continue to support this Ponzi scheme. I have a contract with them, I have kept my part of the bargain, now I expect them to keep theirs.

kiis102

Unfortunately I'm with them too. 1yr fixed @ 3% like much of you. Not at all happy I can't get to my money, been locked out for what 3 or 4months??

I dropped them a few emails the other day. Told them I don't want my cash transferred into another account or into their dividend thing, I just want my money+Interest. They told me that's ok, a note has been placed on my account and I'll get my money once restrictions are off.

Then I replied asking for a time frame on resolution, obviously they don't have one other than they expect something 'shortly'. I then queried possible financial issues...

"The Credit Union is not in financial difficulty, the problem lay with the capital-to-asset ratio being under 5% - this has now been rectified and the funds are in place, which is why we have applied for these restrictions to be lifted."

I'm willing to give them another few weeks before my patience will start to wear off.

Archi_Bald

kiis102 wrote: »

"The Credit Union is not in financial difficulty, the problem lay with the capital-to-asset ratio being under 5% - this has now been rectified and the funds are in place, which is why we have applied for these restrictions to be lifted."

They have been saying this for weeks, if not months. They're just stringing you along.

masonic

Porcupine wrote: »

However, if you have substantial savings elsewhere and the loss of interest and access bothers you but won't cause you hardship, I would be careful about doing something that might make it very much worse for those vulnerable people. If there is a run and it causes DCU/EBCU to collapse that helps nobody, and those vulnerable people are those least equipped to deal with it.

I wonder how many of those vulnerable people are also members of the union with savings that they cannot access. Those vulnerable people with their savings tied up in this mess may be equally unequipped for this situation to be prolonged. Sooner or later there will have to be some sort of bail out. There is no way that this situation can be unwound in an orderly fashion IMHO.