What is a credit union?


Credit unions first appeared in the UK in the 1960s, but the first credit union in the world is thought to have been set up in 1852. They were set up with the idea of people helping people, and still operate this way. Credit unions are member owned, not for profit cooperatives that operate to service their members.

Banks were set up to provide loans to the public and building societies were established with the aim of every member owning their own home. Whereas credit unions were set up to help share funds amongst the community to offer fair and affordable loans. Credit Unions pool members savings together so that members can access a loan if they need one.

Credit unions are fully regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). The PRA reported at the end of March 2020 that there were around 277 credit unions in the UK with a combined total of 1,428,641 members! (In 2020, No1 CopperPot hit a record high of 35,000 members).

Common bonds

Credit unions require all members to be in a defined common bond to be eligible to join. A common bond can be where you live, meaning you need to live in a certain catchment area or fall under a specific postcode to join. For example, South Manchester Credit Union’s common bond is people living in and around South Manchester. Alternatively, your field of work can be a common bond. No1 CopperPot is a Police credit union, this means you must be a part of the Police Family to join.

How do credit unions operate?

Credit unions are self-sufficient and operate only from the profits they generate. They don’t have any shareholders, the credit union is owned by the members, meaning any decisions are made in the best interest of the members.

Credit unions create profit by lending out members savings in the form of loans or mortgages. The money that they make from the interest charged on these products then form their annual profits. At the end of the financial year any surplus profits may be distributed back to their members in the form of a dividend.

At the end of March 2020, the PRA reported that the loans across all credit unions in the UK totaled an impressive £1.1 billion.

Even after operating in the UK for over 57 years, the ethos of the credit union sector still remains the same, people helping one another.


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