Updated 18 December 2012
Latest News
Interest Rate Consultation
18 December 2012
DWP are pleased to confirm publication of the HM Treasury Consultation Document on raising the maximum rate of interest that credit unions may charge.
The consultation seeks views on the proposal to increase the current cap from 2% to 3% per month.
The legislation is the responsibility of HM Treasury, and stems from analysis contained in the DWP Feasibility Study which examined how the credit union sector can modernise, serve many more customers and become sustainable.
It is important to stress that, if introduced, this change would be permissive.
It does not require credit unions to increase the interest they charge but it will allow an individual credit union to determine the appropriate interest rate to attract customers and allow them to cover their operating costs.
Interest Rate Consultation
29 November 2012
Economic Secretary to the Treasury, Sajid Javid MP and the minister responsible for credit unions, announced in his address to the All Parliamentary Party Group on Credit Unions on 27 November that a consultation paper on raising the interest rate cap is due to be published in mid December.
The consultation is due to run for approximately twelve weeks and everyone in the industry, from the smallest credit union run by volunteers, to the largest unions running out of multiple offices, is invited to respond to the consultation.
Further updates about the consultation will follow.
Credit Union Expansion closing date for bids reminder
09 October 2012
A reminder to bidders that the closing date for bids is the 26 October.
Please note that communications between DWP and any bidders will be via the messaging service on the DWP eProcurement solution. Questions and Answers since the publication of the ItT on the 10th September are also available by that means to registered users.
Commercial Specification
01 October 2012
In support of our answers to your questions since July we would like to take this opportunity to remind all potential bidders that the principle objectives of the Credit Union Expansion Project are:
- To increase credit union membership by at least 500,000 people on lower incomes by March 2015, increasing to 1 million people by 2017.
- To increase access to affordable credit so that members save an additional £1 billion in interest payments compared to the charges they would otherwise have to pay to high cost commercial lenders between the start of the project and 2019.
- That credit unions deliver this expansion in a way that makes them financially sustainable.
The provision of the financial and support services listed in the commercial specification of the project and the systems’ ability to deliver these services are important because these are what consumers and credit unions told us they needed during the feasibility study. The provision of all these things will need to be achieved in harmony with increased membership, personal deposits and personal loans in order to achieve the balance of expansion and cost reduction required to make financial sustainability possible.
Credit Union Expansion Project Invitation To Tender
10 September 2012
The CUEP Invitation to Tender (itT) is now available and can be accessed using the following link:
If you intend to act as a lead supplier and complete this ItT you need to access this site and follow the registration guidance. Once registered you will be able to access the CUEP itT by clicking on the 'ITTs Open to All Suppliers' link. The following guidance will help with registration on the system, and describes how to start creating your response to the CUEP itT:
Please note that all further communications between DWP and any bidders will be via the messaging service on the DWP eProcurment solution.
Question and answer update
29 August 2012
The Credit Union Expansion Questions and Answers section has now been updated with questions 77 to 99 asked since, the Newcastle upon Tyne Briefing Session held on 25 July.
Question and answer update
15 August 2012
The Credit Union Expansion Questions and Answers section has now been updated with questions 45 to 76 asked at, and since, the Newcastle upon Tyne Briefing Session held on 25 July.
Supplier Briefing Leeds Event
6 August 2012
The ITT is scheduled to be placed on the Bravo eProcurment system week commencing 3 September. The planned supplier briefing will go ahead at 11.30am on 13th August at DWP Quarry House, Leeds, LS2 7UA.
The aim of this briefing is to give those organisations intending to act as lead bidders, or leaders of a partnership, the opportunity to ask questions following publication of the draft specification on 1 August 2012.
Please refer to Part 1 section 5 of the draft specification to check eligibility to act as a lead bidder. DWP reserves the right to amend the draft specification.
In addition we intend to share information about the draft funding model and potential management information requirement at this briefing. With this agenda in mind, lead bidders should ensure that the correct personnel are identified to attend.
Places at the briefing are limited to three per lead bidder / partnership. If you plan to attend the event please confirm the names and contact details of your representatives no later than Thursday 9th August to the Credit Union Expansion Project email address: CREDITUNION.EXPANSIONPROJECT@DWP.GSI.GOV.UK.
Please note that Quarry House is a government building and has strict security. Only those nominated by lead bidders via the process outlined above will be allowed access to the building.
Credit Union Expansion Project Requirements and Timeline Presentation
6 August 2012
The key dates provided at slide 31 in the presentation published on the 30 July are to be updated. This slide has been removed and further updates will be published on this website.
Credit Union Expansion Project draft specification
1 August 2012
The Credit Union Expansion Project (CUEP) briefing sessions and market engagement events on the on 3 July and 25 July provided an overview of the forthcoming procurement exercise and details about our requirements to deliver CUEP.
We have now made a full draft version of the specification available to provide more information about the CUEP requirements and to share as much information as possible with you prior to issue of the full Invitation To Tender (ITT).
- Credit Union Expansion Project draft specification (304KB)
- Demographic profiling report (Experian) (1.5MB)
However, please be aware that whilst this is close to a final version, further changes may be made to the version that is subsequently issued with the ITT, and these changes will be highlighted at that point.
The ITT is scheduled to be placed on the Bravo eProcurment system week commencing 3 September and the supplier briefing for lead bidders will be held at 11.30am on 13 August at Leeds, DWP Quarry House. Full details of this event will be included in the ITT.
Credit Union Expansion Project Requirements and Timeline Update
30 July 2012
The presentation, published on the 10 July, on the requirements of the Credit Union Expansion Project has been updated. The update includes additional guidance on the potential requirements of the project and how these will be measured.
Please also note that the time line originally presented indicated that the full Invitation To Tender (ITT) would be made available on the 1st August, with the supplier briefing for lead bidders on the 9th August. The ITT is now scheduled to be placed on the Bravo eProcurment system on the 8th August, the supplier briefing for lead bidders will now be the 13th August at Leeds, DWP Quarry House at 11.30, full details of this event will be included in the ITT.
Any additional questions can be asked by e mailing
Credit Union Expansion Project Questions and Answers
25 July 2012
On 3 July 2012 the DWP Credit Union Expansion Team held an event at Villa Park Birmingham to brief credit unions and partners on the requirements of the project and the procurement timeline. During and following the event a number of questions were raised which are documented In the Questions and Answers page along with the DWP response. The log will be updated in the lead up to and during the procurement process.
Credit Union Expansion Event in Newcastle upon Tyne
16 July 2012
Following a well attended event in Birmingham on 3 July a further event is being planned in Newcastle upon Tyne on 25 July 2012.
The event will include a presentation on the requirements of the Credit Union Expansion Project and timeline, followed by a question and answer session and is intended for credit unions and their partners.
Further details of the venue, timing and agenda will be confirmed.
To register your interest, please send the name(s), position held and organisation(s) details, by Friday 20 July 2012, to:
Credit Union Expansion Project Birmingham Event
10 July 2012
On the 3 July 2012 the DWP Credit Union Expansion Team held an event at Villa Park Birmingham to brief credit unions and partners on the requirements of the project and the procurement timeline.
Further events may be held dependant upon demand.
For further information please contact us using the details provided.
Credit Union Feasibility Study
28 June 2012
On 27 June 2012 it was announced that the Department for Work and Pensions will take forward the findings of the feasibility study.
This followed publication of the Credit Union Expansion Project (CUEP) Feasibility Study (423KB) on 10 May 2012 and requests for informal views.
Ministers and officials from the Department for Work and Pensions have also taken part in a large number of discussions and events to canvass views from a wide range of individuals and organisations.
The report and its content have been largely welcomed by the credit union sector and a wide range of stakeholders that includes charities, charitable foundations and social research institutions as well as housing providers and local councils, with the majority of respondents seeing the merits of the proposals outlined.
The following seeks to reflect informal views offered, although it is not possible to describe all of those views in detail.
A ‘Frequently Asked Question’ brief provides answers to the most common questions and concerns.
We would like to take this opportunity to thank many of you for taking the time to provide your informal views.
Summary of Informal Views
Collaboration
The report identifies that credit unions will need to collaborate as never before to attain the level of change and expansion required to achieve sustainability.
This needs to be combined with a number of business efficiencies which include:
- Automated decision making
- Integrated / Centralised services
- New products that customers want
- Development of partnerships to expand payroll deductions
- Marketing the improved new services
- Working with the Post Office
Cumulatively these approaches could create a major uplift in membership, and create the delivery capacity required to deal with the demand.
The view of many credit unions was that while progress was being made to reduce costs and improve efficiencies the feasibility study demonstrates a huge opportunity for the future. The need for collaboration was accepted as an important step to embrace that change.
The Credit Union Ethos
There was concern by some smaller and volunteer run credit unions that they would not have the capacity to run the range of financial services that expansion would demand. They were also some concerns that they would lose their community identity.
Credit unions are member-owned financial cooperatives, democratically controlled by their members, and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to their members.
They can offer a real alternative to mainstream banking where one is needed, but they also need to look to the future to become financially sustainable through increased membership, more efficient working, and delivering the financial products and services that people need. They need to work collaboratively to achieve this.
It is not unusual for credit unions to merge, share assets and service coverage, whilst continuing to serve their communities.
However there is no doubt that some credit unions will find the growth ambition of the report a challenge but that is not to say they cannot be part of change. To achieve the level of change recommended in the report credit unions will need to see the opportunity to expand and achieve sustainability through collaboration.
Cost Reductions
There was concern by some that 40% savings is unachievable.
The study found, on the basis of individual consultation, assessment of profit and loss accounts, and on site process modelling, that major cost reductions are possible in many credit unions. The aggregate reduction in operating costs that was found to be possible was just a little above 40%.
There are a few credit unions that have already introduced some of the systems and process changes required to achieve significant cost reductions. But many are unable to do so because of the costs involved, or because they are so busy delivering their much needed services that they do not always have the opportunity to look inwards at their operations. DWP and the report recognise and respect these factors, but believe that a modernisation and expansion project could work with the sector to deliver changes that will help it address the issues.
Interest Rate Increase
The section covering the potential to raise the credit union APR attracted much comment, with the majority supporting an increase and a minority opposing or suggesting removal of the cap altogether.
The Project Steering Committee raised the issue of interest rate because 1) it was raised by several credit unions in private discussion and 2) when the costs, income and profit & loss of a large theoretical modernisation project were modelled it became clear that total costs would continue to exceed total earned income, and that it would be very difficult for modernised, expanded credit unions to make sufficient surplus to become sustainable at the existing rate. Or to put the point at its simplest, making low value loans to relatively high risk consumers incurs unavoidable costs that, even after a major change and modernisation programme, struggle to be addressed at 2% pcm.
Some comments asked why other high-cost lenders could not be capped. Independent studies have shown that introducing interest rate caps on higher cost loans from regulated commercial lenders carries a real risk of restricting the market and making vulnerable consumers even worse off by reducing the supply of credit. And there is further concern that capping interest rates could also drive vulnerable consumers into the hands of illegal loan sharks.
BIS has commissioned research into the impact on business and consumers of a variable cap on the total cost of high cost credit from the University of Bristol. The final report is due later this year and will inform policy making.
Credit Union Branding
The importance of ‘branding’ and a marketing campaign was clear but there was disappointment by some that a national campaign would not be immediate.
The Feasibility Study Report revealed that only 13% of customers interviewed were aware of what credit unions do; though it is worth noting that this figure is a considerable improvement on the 4% and 6% results we have seen in previous credit union studies.
The project steering committee and Experian, plus many credit unions, advised that the sector will get only one attempt at expansion through a national marketing campaign; with Credit Unions needing to be ready to provide the financial products and services required, and ready to meet the considerable demand that such a campaign could create. As many credit unions still have a lot to do to modernise and expand at this stage, and with many unable to offer the full range of financial products that consumers want, it is clearly prudent to introduce national marketing when the sector is ready to respond, not before.
So whilst we recognise the benefits of marketing we are convinced that a national campaign at this stage would be detrimental to credit unions and consumers in the long term and, therefore, a waste of resource. This is not to say that individual or local groups of credit unions could not successfully run their own local campaigns they are equipped to handle.
Post Office
Some respondents questioned the links with the Post Office. The feasibility study shows how the credit union sector could develop and therefore be in a position to work more closely withPost Office Ltd in the future.
The credit union sector will be expected to explore the commercial opportunity with Post Office Ltd as the project develops.
Conclusion
The purpose of the FSR was to consider and report whether it is possible, with Government support, to provide the kind of financial services that people want for up to one million more consumers on lower incomes, and do so in a way that enable credit unions to modernise, expand and become financially sustainable.
The responses indicate that whilst Credit Unions may be challenged by the expected timescales to become financially self sufficient and increase membership by 1 million, they agree that external funding is more difficult to come by and that the proposals offer a real way forward for the sector.
And finally the proposals are not about incremental growth, but about scaling up the sector to offer a real alternative to high-cost lenders and to offer people on lower incomes the range of other financial products they told us they would like from credit unions. Ultimately, the findings of the FSR are for the credit union sector to decide if the recommendations provide a route they wish to follow.
