Last week I wrote about the problem of Universal Credit which will eventually affect all tenants receiving benefit.
I looked at an article in the Property Investor News magazine which recommended landlords arrange for their tenants to sign up to credit union accounts to ensure payment of their rent.
But what are credit unions and how do they operate?
Credit Unions and their background
Credit Unions developed from the co-operative movement which in turn had its roots in the philanthropic ideas about the conditions of the workers after the industrial revolution and the writings of Robert Owen.
The co-operative movement started in Rochdale with the Rochdale Pioneers in 1844, but has spread throughout the world. Indeed co-operatives are often considerably more important in other countries, for example Ireland, Canada and the Caribbean.
Here is a definition of credit unions taken from Wikipedia:
A credit union is a member-owned financial cooperative, democratically controlled by its members, and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.
How credit unions can help landlords
One of the services offered by credit unions is what is known generally as the ‘jam jar’ account. These are a way to help people on benefit budget and pay their most important bills, without these being put at risk of being swallowed up by other debts.
Basically the benefit is paid to the credit union into a special account, parts of the benefit then being ring fenced and paid out to important creditors such as landlords – meaning that their homes will not be at risk.
There is normally a modest monthly charge for this service, such as £5 pm, but generally credit unions are more supportive and flexible than the big banks.
For example here is a You Tube video from a credit union in the Eastern Region, Rainbow Saver Anglia Credit Union about their new credit union shop in Peterborough:
Where to find out more
Credit Unions will generally only take customers from their local area. So if you are looking for a credit union, you need to speak to people such as your local CAB who will know who they are and will be able to put you in touch with them.
I also have a Credit Union list on Landlord Law which lists all of the Credit Unions I am aware of, which operate jam jar type accounts.
They come highly recommended for both landlords and tenants. As it said in the video – they are a good way to help tenants avoid loan sharks.
If anyone reading this is from a credit union, please feel free to let me know about your company so I can add you to my list.