. People generally aren't price sensitive for small-medium sized personal loans (a point illustrated by this discussion!).
There’s no reason why loans up to €500 couldn’t be turned around in 15 minutes for many credit unions.
There's 250 or so credit unions and some of them are backwards but the type you visited is a dying breed. How did you know they were volunteer tellers out of curiosity? I've worked with a huge number of credit union staff and I've never come across a volunteer teller but I also wouldn't be able to tell from looking at them!
Funds are plentiful, yes, and credit unions are in fact pretty keen to not take your money at the moment for that exact reason. They can't lend out enough money but savings are piling in which creates a huge pressure on their capital since they have to keep a blanket 10% of total assets in a regulatory reserve. A significant number of credit unions have introduced temporary caps on savings to try mitigate this problem (which is a total nonsense to begin with, but that's another debate)
Interest rates being low is also a huge problem for them since they have such excess funds.
You do realise that this idea of "personal knowledge of borrowers' own circumstances" is one of the underlying reasons for the credit frenzy we had during the Celtic Tiger? Banks and credit unions alike lent to people who couldn't afford it but sure it was grand because Mary or John were "sound" and "good for it". Character based lending is a nonsense and doesn't mitigate risk but rather increases it exponentially. That's why some credit unions were carrying arrears of 30/40 or even 50% of their loan books around 2010/11.
The business model never worked particularly well. When credit unions were generating their "best" returns of assets it was very often on the basis of reckless lending coupled with the investment of surplus funds in risky products.
Excellent. But we're talking about credit unions.
My point was more that 'typical' credit unions aren't run like 'Penny Banks' with volunteers recording transactions in a paper ledger. The experience you described is no longer typical of the sector, and most definitely not of those credit unions pushing for legislative changes.
I'm not sure which CU you looked at, but IT cost for most has been unusually high in the past few years due to mergers. However, their IT spend per customer is very competitive compared to banks.
They can't compete with PCPs, obviously. They're generally close to zero APR and the costs associated with setting up the infrastructure to do HP type products are prohibitive and it's unlikely that there would be regulatory approval for such a product. There's also a huge amount of risk involved if you don't understand the autotrade market and regardless of all that, PCPs and car finance generally is sold at the point of sale - nobody can compete with that level of convenience. A PCP payment is always going to be small when compared with a straight-up loan on the same car so there's no getting around that cashflow USP for a credit unions.
Provident, to take an example, can charge 187.2% APR to loan someone 500 quid for a year,
OK.
But why not offer car loans at 4% instead of 7-8%?
4% is 4x times better return than 1% on bank bonds.
At 4% would not some PCP customers be convinced to switch, as with CU loan you own car outright.
@24601 I am sure they were volunteer tellers because their productivity was far below the minimum wage, although still greater than zero.
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