LMCU (originally known as SCECU - Southwark Council Employees Credit Union) is a community-based financial cooperative that exists for the benefit of working and non working people of Southwark and Lambeth boroughs. They offer savings accounts, current accounts, loans and insurance to members of the community who find themselves financially excluded from sources of credit, or forced to use other avenues of credit such as loan sharks, door to door lenders and payday loan companies. Current membership stands at over 13,000 members across the two boroughs.

History

London Mutual Credit Union
Founded	1982
Type	Financial Co-operative
Location	Camberwell, Peckham, Borough, Brixton;
Area served	Southwark & Lambeth
Members	c. 13,500
Employees	45+
Website	http://www.creditunion.co.uk
Formerly called	Southwark Council Employees Credit Union Southwark & Kings Credit Union Southwark Credit Union

1982-1992

The Southwark Council Employees Credit Union(SCECU)was born out of the commitment of a small group of Southwark Council workers who had the vision of creating a self-help financial institution that would offer the opportunity of economic advancement and financial stability to their colleagues and workmates. Among these, mostly manual staff, many were low paid and unable to access affordable credit from mainstream providers.

The credit union's inaugural meeting was held in the Mayor's Parlour at the Municipal Offices, Walworth Road on 18 February 1982. At this meeting, the 22 initial shareholders required by the Registry of Friendly Societies to form a credit union were identified, the organising committee was established and council support for the new venture was publicly assured. The first meeting of the organising committee held on 17 March 1982 and was attended by those who had been appointed at the inaugural meeting and it was decided that that the minimum payroll deduction per member would be £2.50 a week (£10 a month). Based on the American experience, payroll deduction was seen as critical to success and had to be made available from the outset to process deposits and loan repayments. However, not all members of the workforce had their wages paid directly into bank accounts. Many workers were still paid in cash and in order to introduce payroll deductions money had to be deducted by the payroll section before the employees received their envelopes. For many, payroll deductions were their first experience of saving in a financial institution.

SCECU was created with the support and agreement of Southwark Council. It was regarded by elected members and council management as a positive contribution to staff morale and economic advancement, and as an important staff benefit. However, initially, council support did not go as far as assisting the credit union with resources, funding or premises. The emerging credit union began life entirely dependent on volunteers who organised and ran the credit union in addition to their regular employment responsibilities. With no central credit union office available, the volunteers formed a network of local area representatives, based at different sites throughout the borough. By 1984 SCECU was finding it increasingly difficult to attract volunteers with the skills and expertise required to carry out operational functions and staff the various committees, the board felt it was time to look at the way in which the credit union operated within the framework of the council structure and identify new resources. Much needed support arrived from Southwark Council in May 1984, the council agreed to pay for a part-time administrator and offered free premises for a central at the Gate House, which was situated above the Neckinger Depot in Spa Road.

Although this was a welcome boost the problems did not all disappear, by September 1985 membership had declined to 299 members and the value of savings increased by a mere 1%. Only 279 loans were made compared to 423 in the previous year. This disappointing lack of growth was compounded by some serious problems with delinquency as members left their jobs without making arrangements to repay the loans. In an effort to reduce delinquency, changes were made to loan agreements in January 1986 making it possible for the credit union to have outstanding loans settled by the borough treasurer's department from final salary payments. Also in the same year, the credit union had begun to tighten its credit control procedures and for the first time began taking legal action against outstanding loans.

By 1988 due to council cuts, funding for the part-time administrator were stopped but Southwark Council renewed efforts to address local deprivation and a new strategy was formulated. Within this strategy credit union development was to play a significant role and the result was that the Church Urban fund, Southwark Council and the Department of the Environment came together to establish and fund a credit union development agency for Southwark (SCUDA) which was led by Louis (Roy) McLeod as project coordinator and company secretary. Southwark Council allocated an office in Spa Road for SCUDA’s use which was located in the same depot as SCECU’s own office which further enabled a strong partnership and joint working relationship. There was a constant sharing of information between the organizations and SCECU benefitted from a transfer of resources, especially manpower and expertise from SCUDA which led to record rates of growth from 1990 to 1993. In this time membership had quadrupled from 274 in 1990 to 1187 in 1993 and savings for the same period trebled increasing from £214,162 in 1990 to £653,846 in 1993. Also company assets also trebled from £236,634 to £697,231 and loans went from £166,036 to £589,807. SCUDA’s action plan for the credit union was that it would be financially self-sustainable from March 1995. After that date, the credit union would not only pay all its own costs but begin to pay for the services it received from SCUDA.

1993-1996

The PEACE project was a multidimensional regeneration initiative which aimed to stimulate business and economic activity, combat poverty, create jobs, tackle over indebtedness and raise living standards in Peckham and the surrounding areas. It was a partnership programme led by the North Peckham Task Force and funded by Southwark Council and the Church Urban Fund. Other partners included The Co-operative Bank, the Department of the Environment, and SCUDA, CCU (Camberwell Credit Union) and SCECU. The PEACE project was officially launched on 14 June 1993 by Tessa Jowell, MP for Dulwich.

It was also decided in 1993 by the boards of SCUDA and SCECU that Roy McLeod (then manager of SCUDA and the PEACE project) would also act as manager of SCECU at no additional remuneration. With the formalisation of this role Roy would be able to optimise the use of resources at his disposal by allocating them flexibly across SCUDA and SCECU.

With the financial support of the North Peckham Task Force, the project acquired premises at 221 Rye Lane into which both SCUDA and SCECU immediately moved. This was another major step forward for SCECU as it became the first industrial credit union in Britain to move into high street premises. Its location in the heart of Peckham helped to raise awareness of the credit union as a financial services provider and to build its image as a trusted, effective, professional and quality organization. In due course CCU also moved all its operations into 221 Rye Lane.

By 1995 the physical limitations of occupying 221 Rye Lane as a head office were becoming increasingly apparent. Dick Blackmore (SCECU President since 1992) had a vision of SCECU buying its own premises to establish itself as an independent and autonomous financial institution. The right property was eventually located at 79 Denmark Hill in Camberwell, not far from Kings College Hospital and was purchased early in 1996 from Southwark Council. With this acquisition SCECU set another record in the history of the credit union development in Britain by becoming the first industrial credit union to buy its own high street premises. Credit Union House at 79 Denmark Hill was officially opened on 11 July 1996 by the Deputy Mayor of Southwark. On moving to its new premises, SCECU was quick to install a 24 hour banking system, the first to be offered by a Credit Union in Britain. The service, known as Credit Union Direct, was a remote banking service by which members could check their balances by phone as well as make enquiries and apply for loans.

Also in 1996 the board turned its attention had also turned to internal management and Lakshman (Lucky) Chandrasekera, was appointed the credit union’s manager to coincide with the move. As the PEACE project and SCUDA were to end in November 1996, Roy McLeod would no longer be in a position to act as manager for the credit union. With new premises and a new full-time manager, a new era was to begin in the credit union’s history. The PEACE project, and SCUDA, had enabled SCECU to become financially self-sufficient and employ its own full time staff to deliver services and perform administrative and management functions in house.

1997-2001

In 1995 Kings Credit Union (KCU) was the first credit union in the borough to approach SCECU about the possibility of a transfer of engagements. At the time KCU had around 140 members and assets of £90,000, even though it had been established in 1991 and with a common bond of around 7,000 employees that were currently working for Kings College Hospital. KCU was modelled on SCECU, and was promoted as an employee benefit and supported by the Health Authority with payroll deductions, office space and staff time. However, even with this support it was not long before running the credit union became difficult for the employees who served as volunteers.

Volunteers were stressed and overworked, bad debts were increasing and it was proving difficult to recruit a full board of directors. The future of KCU looked bleak but Simon Couldrey (treasurer at KCU) believed that there were real benefits from merging with SCECU and he approached Roy and Lucky to discuss the proposal. SCECU’s office was close to the Kings Hospital and it made good economical sense for the credit union to be run by SCECU's skilled board and management team. The proposal for a merger was formally approved as a special resolution at a general meeting of KCU held on 19 September 1995, this was to be the first credit union transfer of engagements in Britain and a real ground breaking move for the credit union movement in Britain.The resolution was finalized on 1 October 1997 and as a result the name changed from Southwark Council Employees Credit Union to Southwark and Kings Employees Credit Union (SKCU).

Another development was to help SKCU realise its vision for growth, the new Labour Government was determined to encourage development in the credit union sector as part of its strategy to tackle social and financial exclusion. A new common bond was introduced that would enable anyone living or working in a common bond area to join as a member (previously credit unions could only register a live or work common bond, not both). This allowed SKCU to apply for a change in its common bond to facilitate a transfer of yet another credit union, this time it was the Borough and Bermondsey Credit Union (BBCU) who had been under pressure from a lack of volunteers and active directors. The application for the change in common bond was approved on 23 September 1999 and this made SKCU the first employee credit union in Britain to change its bond from employee to live and work. To reflect its new status as a community-based organization the name was again changed to Southwark Credit Union (SCU) from the 1st of October 1999.

As SCU planned to move forward as a professional live or work community organization, severe financial difficulties started at Camberwell Credit Union (CCU). In August 2000, on discovering that the value of members’ savings in CCU had collapsed, the registrar of Friendly Societies imposed a section 19 order (1979 Credit Union Act) on the credit union. The order prohibited CCU from admitting new members, making loans, or releasing savings and only allowed the credit union to accept loan repayments. Harriet Harman, the MP for Camberwell and Peckham, realised immediately the devastating impact that a collapse at the CCU could have on the lives of its members and initiated a rescue operation that would ensure that members’ savings would not be lost. She assembled key people from SCU, the FSA, ABCUL, the Building Societies Association, the British Bankers Association, Price Waterhouse and the London Borough of Southwark and central to the plan was for SCU to accept a transfer of engagements from CCU.

CCU was transferred into SCU on 4 October 2001 and as a result the assets of SCU grew to £3.9 Million, membership increased dramatically and SCU inherited the premises of 221 Rye Lane. With no loss of members’ savings, SCU’s rescue had succeeded in maintaining the confidence in the stability of the credit union and even managed to pay a 1.5% dividend payment on all savings accounts.

2002-Present

In July 2002, credit unions became regulated as deposit takers by the Financial Services Authority (FSA). The introduction of this new regulatory regime marked a step forward in the strengthening of credit unions as financial institutions. This then led to credit unions being insured by the Financial Services Compensation Scheme; this provided credit union members with the same level of protection as customers of banks and building societies.

In 2003 SCU took a leap forward and mostly abandoned the traditional link between savings and lending and introduced capacity based lending. For the first time, it was now possible to borrow without saving for three months and loans were no longer granted as a percentage of prior savings. A borrower’s savings in a member’s principal savings account could still not be withdrawn if lower than the outstanding loan balance, but a borrower could open up a new savings ‘share’ and withdraw subsequent deposits freely. These changes to the loan policy came at an opportune time as the makeup of the credit union’s membership had changed considerably since the three transfers of engagements from other credit unions. Lucky and the board realised that new more market-driven and commercial approaches would be required to attract people into membership and build the loan book as previous restrictive loan policies had made the credit union unattractive to many people.

In response to a growing demand from members dissatisfied by having basic Post Office accounts or having no access to bank accounts at all, SCU created a Benefits Direct account which allowed members to have welfare benefits paid directly into the credit union. Significantly, these accounts offered the opportunity of obtaining affordable loans, as loan repayments were made directly from the account. Many high risk borrowers, who otherwise would have had no choice but to use high-cost sub-prime lenders, were able to borrow at rates they could afford because of the guarantee of repayment that these accounts afforded the credit union. Despite the advantages this account provided its members it still did not offer electronic cash and debit cards for ATM’s or in retail outlets, neither did they allow for the setting up of Direct Debits or standing orders.

It was the limited functionality of the benefits direct accounts that led SCU to join a small group of nine ABCUL credit unions that pioneered and developed, in collaboration with The Co-operative Bank the introduction of fully functional credit union current accounts. This has given many members the ability to have benefits paid directly in and allowing them to have bills taken straight out of their benefit payments leaving them the rest to draw out therefore making financial planning easier for its members. SCU’s commitment to innovation meant that they were the first credit union to offer current accounts in London and today has over 6,500 active current accounts.

In March 2010 SCU took another transfer of engagements, this time from Lambeth Savings and Credit Union(LSCU), this allowed SCU to move into another common bond area altogether and allowed them to sign up any person who lives or works in Lambeth. Due to this SCU could no longer just be called Southwark Credit Union and duly changed its name to London Mutual Credit Union (LMCU). By November of the same year the LSCU office along Brixton Hill was closed and a brand new office was opened along Acre Lane giving LMCU a foothold in the heart of Brixton’s town centre.

Milestones

1982 - First employee credit union to offer deductions at source

1985 - First credit union to employ paid staff

1995 - First high street shop for members of an industrial credit union in mainland Britain established at 221 Rye Lane – shared by CCU, SCUDA and SCECU

1996 - First industrial credit union in the UK to buy its own premises

1996 - First credit union to offer 24 hour telephone banking

1997 - First credit union in Britain to handle a transfer of engagments (KCU to SCECU)

2006 - First credit union in Britain to sign the Department of Works and Pensions (DWP) contract to deliver Growth Fund Loans to the economically disadvantaged

2007 - First credit union in London to offer current accounts

2012 - First credit union to offer Payday Loans

Services

Savings Accounts

Savings accounts are the cornerstone of any credit union as these savings are needed to issue loans to other members. Members can save in a variety of different ways such as direct debits, standing orders, cheque or postal order payments and by paying in cash over the counter. Interest is not paid on savings accounts like a normal bank but a dividend payment can be paid if the company has made a profit and if the members vote for it at the annual general meeting, for example the dividend that was paid in 2011 was 1.5% which was a better rate than some banks. Young savers accounts are also avaliable to members and they can save for their children in exactly the same way, an added bonus of this account is that the dividend is usually higher than adult savings account to help promote and instill a savings culture for the children to take into adult life. the last dividend paid on a young savers account was 5%.

Current Accounts

Current accounts are a relativly new thing for credit unions in the UK only being launched in 2007. Current accounts let members have a salary, benefit or pension to be paid in and then allows them to be able to withdraw money from any ATM. It also allows the member to set up direct debits and standing orders to pay for services and the card can also be used to pay bills over the phone and on-line, this give members more freedom in how they use their money than the previous system whereby any payments paid in could only be withdrawn in cash.

Loans

Credit union offers low interest loans to those members of the community who may have bad credit or who have been refused loans in the past with other lenders, the aim is to stop members of the community using loan sharks, door to door lenders or payday loan companies who often charge exorbitant rates. Credit union loans differ from other loans in the fact that part of the repayment is kept for savings, this means that when the loan is cleared off the savings are the members to keep. Alternativlty when the saving and the loan amounts are the same the member can use the savings to clear off the loan, this is also much better for the member as the earlier the loan is cleared the less interest is paid, this is due to the interest being calculated on a monthly basis on the reducing loan balance. Another difference from the banks is that there is no charge for early loan repayment.

Insurance

Free life insurance is given free with every savings account and is run through CUNA Mutual. This means that should the unthinkable happen, the members designated beneficiary will receive the savings plus the insured amount up to a maximum of £10,000. Savings are also covered by the Financial Services Compensation Scheme which will pay out up to £85,000 if the credit union were to fail.

Payroll Deductions

Members can save directly from their salary (provided the company has set a scheme up), this means once they receive their payslip a chosen amount to go into their savings account will have already been deducted. There are currently 22 companies that offer payroll deductions for their employees with LMCU

Anchor

Camden Society

Compass Group

Crampton Primary School

Family Mosiac

Fusion Lifestyle

Glen Care

Global Academy

Greater London Authority

Guy's and St Thomas' NHS Foundation Trust

Home Care

Keyworth Primary School