Credit Unions and insolvency

JohnMc2568

Not really a question just a moan!!

As a debt adviser and a Debt Relief Order intermediary I have for some time been struggling with putting credit unions debts into insolvency.

In an area such as mine which is very deprived I see a lot of clients who have credit union accounts. In fact as part of our budgeting advice we suggest our clients start saving with their local credit union because of their access and interest rates (I do appreciate that a number of credit unions have higher rates). Many of our client’s rely on credit unions as in reality for many they are a last resort lender and they are reluctant to name them in an insolvency. However the legislation says that all debts must be included in insolvency. As the outcome is that their account is closed many are reluctant to go forward with insolvency because of how much they depend on these credit union loans and therefore remain in debt or stay on a never ending token payment.

The answer is there for the insolvency service as they already make exceptions in the DRO. A debt to a landlord must be listed but after the DRO is granted the client can then make separate arrangements to make payments on the outstanding arrears to prevent eviction. It should be noted that this cannot be recorded as a permitted expense.  Why can this not be extended towards credit unions? My rational would be that if they don’t have a credit union account what happens once the account is closed where do these clients go for loans? It’s either high interest unethical lenders or worse loan sharks. Most credit unions are small (there are larger unions) and the loans outstanding to them are mostly very low and in most cases they will not be the debt that pushes the client into insolvency.

I have put this argument to the FCA and the insolvency service but not got an answer, I am now raising it with our MP and local councillor.

Does anyone else agree have you experienced this?  

MovingForwards

Members are encouraged to stop paying non-priority bills, save an emergency fund and then go for bankruptcy, IVA or start a DMP when seeking advice on MSE. That way they are ready to deal with an emergency, got used to saving regularly and have started altering their mindset on their debt free journey.

If credit is immediately available to someone, how is that helping long-term? 

@fatbelly may have other thoughts, due to his involvement with people.

ToxtethO'Grady

I disagree with any exemption for credit unions they already feel they are different to other debts and will not help clients in financial difficulties by reducing payments or looking at a withhold for a short period to help clients get back on track. They are no different to any other lender in their practices. I have difficulty with their practice of having child benefit paid directly to them and making clients feel that they cannot change this arrangement.

Budgeting advice and helping clients with practical examples of how to save rather than a lender who will offer loans once savings have accrued is the best way to help clients. As MovingFrowards said if they always feel credit is available what will happen in an emergency when they have no access to credit?

rich184

This is nonsense! Most credit unions bend over backwards to support their members in difficulty.  i.e. reduced payment plans and payment holidays.