When was the last time you heard an American presidential candidate even mention credit unions during one of his or her campaign speeches or public appearances?
Unless the event was sponsored by credit unions, the answer likely is "never."
Not so in the United Kingdom, where a very unpredictable election is currently ongoing, and the nation's relatively small credit union movement has not only been mentioned by any number of candidates — including contenders for the prime minister spot — but support for CUs is even specifically included as a plank in most of the major political parties' platforms.
According to the Association of British Credit Unions Ltd. (ABCUL), the leading trade association for credit unions in England, Scotland and Wales, support for a thriving British credit union movement represents a significant theme for political parties ahead of the British general election.
Indeed, ABCUL noted that the incumbent Conservative Party, the Labour Party, the Liberal Democrats (the Conservative Party's coalition partner in the recent government), the Scottish National Party (SNP), Plaid Cymru (the nationalist party of Wales) and the Green Party have all "outlined their own policies for fairer access to credit and more diversity in the financial services sector."
Much of the embrace of credit unions reflects a concern for low-income Britons, who are plagued by extremely high-interest payday lenders as well as a desire to engineer an expansion and diversification of the British financial services sector, which remains dominated by a handful of large multi-national banks seven years after the global financial crisis.
For example, the Conservatives, led by incumbent Prime Minister David Cameron, wrote in their party's platform: "We capped payday lenders, made it easier for you [the British public] to switch your bank account and will continue to support the credit union movement in making financial services more accessible."
Labour also made a reference to usurious lenders in its platform, pledging the party will "deal with the scourge of household debt by introducing a new levy on payday lenders, using the funds raised to boost low-cost alternatives like credit unions."
Ed Miliband, who would become prime minister should Labour win the election, has vowed to hit payday lenders with higher taxes and use such proceeds to assist credit unions.
"The cost of living crisis afflicting millions of Britain's families is so bad that it is creating a personal debt crisis too," Miliband said in a speech on the campaign stump. "The prices families have to pay keep on rising faster and faster than the wages they are paid. And, as a result, the market in payday lending has doubled in just four years. Almost a third of the payday loans taken out in Britain at the moment are to cover the cost of people's gas and electricity bills."
Not to be outdone, the Liberal Democrats teamed up with the Tories to introduce a legislative program called the Credit Union Expansion Project, promised to "grow a competitive banking sector, support alternative finance providers [i.e, credit unions] and improve access to finance for business and consumers."
Among the smaller political parties, ABCUL noted, SNP, which currently forms the Scottish Government, has provided credit unions with access to business support through the "Just Enterprise and the Enterprise Ready Fund," as well as by promoting credit unions in public information campaigns and through Scotland's Financial Health Service. Plaid Cymru of Wales wrote in its own manifesto that it will "investigate a windfall tax on payday lenders that can be used to promote credit unions and responsible lending."
Perhaps the strongest proponent of credit unions in Britain, the extreme left-wing Green Party, spelled out ways that it has already tried to strengthen credit unions in towns where it has some power and influence. In the southern coastal city of Brighton, for instance, the local Greens invested £100,000 ($151,000) in a local credit union and set up an online system to make the credit union as accessible as high-interest payday lenders, while banning payday lenders from advertising on council billboards. The Scottish Green Party also specifically called for the government to support credit unions.
"Building support across all the [political] parties has been an important priority for ABCUL, and it is greatly encouraging to see that our vision of a strong, sustainable, growing credit union movement has resonated with politicians of all persuasions," said ABCUL chief executive Mark Lyonette in a statement. "At this exciting time for the development of Britain's credit unions, we look forward to continuing that cross-party approach in the new Parliament."
Lyonette added that credit union membership in Britain grew by almost 30% during the last Parliament alone, and "ensuring that all the main political parties support the development of the credit union sector has been a key goal of the Association for many years. We have been very successful in making this case in recent years."
Even the Archbishop of Canterbury, Justin Welby and Camilla Parker Bowles, the Duchess of Cornwall (the wife of Prince Charles) have praised credit unions, while attacking payday lenders. Bowles, in fact, is herself a member of a credit union, the London Mutual Credit Union, which is based in the impoverished South London neighborhood of Peckham.
Why have credit unions come to the fore during this election? They are seen as a potential solution to the payday lending problem.
"As in much of the United States, payday lending is legal in Britain, however, some UK payday lenders could until recently charge an APR as high as 5000%," explained Michael S. Edwards, VP for advocacy and general counsel of the World Council of Credit Unions (WOCCU). "This has become a focus of much political debate, given how it exploits the poor and keeps them trapped in a spiral of debt."
Dependence of payday lending is, itself, a symptom of a much bigger problem: financial exclusion.
"Almost 2 million people do not have a bank account in their name, and around 700,000 do not have access to any sort of financial services," said Shaun Fisher, a spokesman for ABCUL. "It is recognized that credit unions are potentially well placed to serve some of this market, and many of the parties now appreciate the benefit of building up a strong credit union movement that can sustainably serve the underserved."
What's interesting about how CUs have come to the fore during this election, however, is how small the movement is in the UK in comparison to the U.S., where credit unions — though very politically active — rarely factor into presidential politics.
ABCUL data indicated that as of year-end 2014, there were only about 362 credit unions across England, Scotland and Wales employing just a little more than 1,500 people. Credit unions in these regions had total assets of £1.26 billion ($1.9 billion); total loans outstanding of £718 million ($1.08-billion); and total deposits of £1.07 billion ($1.62-billion). And the industry counts 1.2 million members, for a penetration rate that is still below 3%, compared to the penetration rate of 46% boasted by CUs in the U.S.
"All the parties in Britain — regardless of ideological bent — seek to diversify the financial services sector," Edwards said. "Aside from the expansion of credit unions, they would also like to see the development of local community banks, which really doesn't exist there, except for mutual building societies but those are not as strong as they once were. Credit unions appear to appeal to all sections of the political spectrum."
With all of this political support, why is the British CU movement still so small? ABCUL indicated that no legal structure for credit unions existed in the UK prior to April 1979 when the outgoing Labour government of Prime Minister James Callaghan passed the Credit Unions Act, which was recently amended in 2012 to allow CUs to "provide services to community groups, attract investment from local businesses and extend services to new groups, including housing association tenants and employees," according to the Scottish Federation Of Housing Associations. The legislation also permitted credit unions to pay interest on savings, instead of just paying a dividend. Just as important, the legislation loosened field of membership rules by allowing multiple common bonds.
Moreover, the British government is also currently sponsoring a 38-million pound ($57.5-million) program called the "Credit Union Expansion Project" to help credit unions" and which is being implemented by ABCUL.
However, British politicians — except for those on the very far left — cannot afford to alienate the country's big banks since they form the core of the UK's economy. "The City of London — one of the most important financial centers in the world — is extremely crucial to Britain's economic health," Edwards said. "So, it's kind of a complicated issue for lawmakers, despite the fact that much of the public have become angered at the banks since the global crisis."
As for the future, ABCUL is targeting 1 million more members for British credit unions by 2019. But even that ambitious goal would only increase the overall penetration rate to about 5% or 6%.
In contrast, in the United States (which has much larger, more deeply entrenched credit union system than the UK), credit unions do not register highly among presidential candidates.
But they have not been ignored either. In 1998, when then- President Bill Clinton signed the Credit Union Membership Access Act, he praised credit unions. "Our credit unions are special institutions," Clinton said. "Because they are not-for-profit organizations, credit unions often can charge lower fees, require lower minimum deposits, and provide more personalized service."
John McKechnie, a partner at Total Spectrum in Washington and a former senior official at both NCUA and CUNA, could point to only one time in the past that a U.S. presidential candidate even vaguely referred to credit unions during a campaign
"In 2004, I know that CUNA worked with both the [Republican George W.] Bush re-election campaign and the [Democrat John] Kerry campaign to secure letters of support for the credit union tax exemption," he told Credit Union Journal. "Other than that, I am not aware of specific credit union planks in major party presidential platforms. But there should be."
Ahead of the 2016 US Presidential elections, WOCCU's Edwards suggested that credit unions should have a higher profile in the national political discourse.
"Right now issues like financial inclusion of the unbanked are very hot in Britain, which is part of why credit unions are at the forefront of their campaigning," Edwards explained. "But the U.S. faces many of the same issues in terms of financial inclusion and community development that U.S. credit unions can and do help solve."
The British experience, Edwards added, indicates that there may be a big opportunity here for U.S. politicians to connect better with voters by embracing credit unions. "Since there are over 100 million credit union members in the U.S., I think that a presidential candidate who made credit unions a significant part of his or her platform would attract a lot of those votes," he concluded.