The Owl Effect
Millions of people use buy now, pay later (BNPL) firms such as Klarna, Clearpay and Laybuy when shopping online or in store. Managed well, BNPL can be an effective way of spreading the cost of expensive items. But getting it wrong could cost you dearly.
Spreading your costs for free over a number of weeks might seem like a good one, but make sure you’ve always got a plan in place for repaying what you owe. Even if you can spread your costs via BNPL, you’ll need the money to repay eventually, even if that’s not in full at the point of purchase.
But there are some things you should know:
BNPL is currently unregulated, which means that you will not get the consumer protection you would get with other forms of lending.
For example, Section 75 law means that your credit card provider must protect purchases over £100 for free, meaning you could get your money back if there is a problem. But if you use a credit card to pay using BNPL, the right to chargeback is negated.
The Regulator is currently looking at how BNPL should be regulated, but until then there is little consumer protection.
Miss an instalment and you will likely pay late fees. Not all BNPL do this, so check the Ts & Cs.
Missed payments can have a negative effect on your credit score as BNPL arrangements are included in the report.
It is easy to get into the BNPL habit and accumulate a number of monthly repayments without realising it. Buy five items with BNPL means five repayments to meet. So make sure you are able to make the repayments before you buy.
A recent Which report shows people in more affluent households or with families are more likely to use BNPL services. They also found that some people are using BNPL to access credit at stressful and challenging times in their life – and could be experiencing harmful consequences as a result.
Used properly, BNPL can be a useful way to spread the cost; just so long as you manage it well.
Hoot, like many credit unions works with the National Illegal Money Lending Team in raising awareness of the dangers of loan sharks and illegal money lenders.
Research carried out by the IMLT has found that Christmas is the second highest reason that people borrow money from loan sharks. This year, there are likely to be more families impacted financially and emotionally, and illegal lenders will take advantage of those in difficult situations. Christmas is meant to be the most wonderful time of year – but for many families trapped in spiraling debt and misery by loan sharks that simply isn’t the case. We want to stop this exploitation of vulnerable people.
How do we spot a loan shark?
Loan sharks rarely give paperwork, exorbitant extra amounts and interest payments are usually added at random, and items including passports, bank cards and driving licences are taken as security on the loans.
As the debts often cannot legally be enforced in many cases the loan sharks will resort to threats, violence and other bully tactics to extort money from people.
Protect yourself and your loved ones from loan sharks this Christmas
If you need to borrow money, check the lender is reputable and authorised. You can do this by checking the FCA register at www.fca.org.uk.
Take a look at the bottom of this page and you will see a statement telling you that Hoot is authorised and regulated. You can check this on the register.
Never borrow from an individual or company that cannot be found on the register.
Be wary of people you don’t know sending you messages through your social media accounts. Loan sharks might offer you a quick deal, but they will soon trap you in a spiral of debt with extortionate rates of interest. Loan sharks have been known to use online platforms to find, threaten and control people in debt.
Think you may be caught in a illegal money lender trap?
Anyone with concerns about illegal money lending can contact the Stop Loan Sharks 24/7 Helpline in confidence on 0300 555 2222. You can also find support online at www.stoploansharks.co.uk.
Every time a loan shark is caught a Christmas fairy gets its wings.
I thought this would be a good time to reflect on our achievements in the past 15 months and marvel at the resilience of both Hoot members and our amazing staff. To do this I have written an achievement/gratitude list.
This is the first time I have done something like this, and I have found that it has had a positive impact on how I see myself. I found that I have been looking at all of our achievements in the complete wrong way! It is so easy to undervalue your achievements and focus on what has not gone well. Taking the positive view and giving yourself a pat on the back changes your outlook completely.
So here is my Hoot achievement/gratitude list:
We are all still here – I am so grateful that Hoot staff have all come through the last 15 months and are thriving. The last year has not been without its challenges and some staff have been severely affected by Covid-19, but here we are.
We know each other better – Believe me, maintaining 15 months of Zoom quizzes, activities, discussions at the start of everyday has not been easy; but we have spent a lot of time learning so much more about each other.
We have been able to help – As you might expect, some members have experienced financial difficulties in the last year, and when they have contacted us, we have usually been able to help in some way. That may have been about repayment holidays, top up loans or signposting to additional help. At the start of the pandemic we released tied savings across the Board to help members get used to the effects of the pandemic.
Our services have improved a lot – Most of our members now access the credit union online or via the App. Whilst we have been able to keep our branch open to help those who do not have access to digital services, or do not have a bank account; most of our services are carried out online or over the phone.
Our members are saving more – Despite releasing savings, members are saving more than ever before. Savings are up 21% on last year and we now look after £2.3m of member savings.
Lending has remained constant – Unlike many other credit unions, our lending has increased and members are coming back again and again in the knowledge that they have access to affordable lending. In 15 months we gave a total of £1.5m in loans.
We managed to get 1,379 new members – How amazing is that!
We often get asked about how we decide is someone gets a loan or not. Not everyone is successful when they apply for a loan, and there is a good reason for declining a loan, particularly if granting the loan would damage the financial well-being of the applicant.
As a community, member-focused business, Hoot makes sure that every loan application is assessed on its merit and according to individual circumstances. The decision is made by a person, not a computer so you know that your circumstances are always taken into account.
There are three stages to making the loan decision, all based on the information you provide.
Affordability is about being able to meet your household expenses and credit commitments, be able to pay the Hoot repayments and still have something left over for savings or emergencies.
We will look at your bank statements or Open Banking link to check your income and outgoings to make sure you can meet the repayments.
As a responsible lender we cannot offer a loan to someone if we think they cannot afford it.
We check your credit report to see how you are managing any debt you already have.
We will see what other credit you have like credit cards, loans, home credit or finance and make sure you are repaying those. This tells us that you are managing your credit.
Missed payments, defaults, debt collectors or CCJs will tell us that you are not managing your credit well. It may not stop you getting a loan with us but it will affect the decision.
We will not lend to you if doing so makes your situation worse, or if your credit report tells us that you are not doing anything to repay other debt.
Your individual circumstances
Once we have checked affordability and credit report we will look at the other information we have to help us make the final decision.
If you are already a member, we will look at whether you have had a loan with us before, and if you have repaid it with no missed payments.
We will also look to see if you are saving with us too. Saving is an important part of being a Hoot member. If you are successful in getting a loan, you will be expected to save a little whilst you are making your repayments.
We will also look at any documents to verify your identity and to confirm any income you say you have. We may ask you more questions before making the decision just to be sure we are lending responsibly.
Making the decision that is right for you
We can’t always give the the answer you want and it is important to us that we don’t make your financial situation worse by adding to your spending or to your debt. Borrowing is not always the best solution. When we decline a loan we will always give the reason why and tell people about where they can go to get help with their finances.
Most of our members who have been successful in getting a loan are saving for the first time and building up a buffer for the future.
The financial well-being, of our members and the community is at the core of our values and we think that lending responsibly plus encouraging savings are the key things in achieving that goal.
Provident Financial has announced this week that is to close its doorstop lending business after a wave of compensation claims. Provident has been a key source of loans for people with poor credit ratings for 141 years and its demise with have a worrying effect on their financial well-being.
Access to a legal and affordable source of credit is limited for many people with poor credit ratings, and limiting that access even further might mean more people will turn to loan sharks for quick and easy loans. But doing this can have devastating consequences and put people into a spiral of debt that will affect their mental health as well as their finances.
There is another way. Credit unions are a fair and legal source of loans for people with a poor credit history. As local community-owned financial services providers, they have their members (because that is what we call our customers) at the centre, and take individual circumstances into account.
Last year Hoot members saved over £1.2m in loan interest by taking their loan with us rather than a doorstep lender or loan shark. The added bonus to borrowing from your credit union is that you save as you borrow. Most new borrowers with Hoot are saving for the first time and building a nest egg of savings for the future.
So beware the ‘easy fix’ of your local, illegal money lender. If you are offered a loan with no paperwork, it will be unregulated and you will stand to lose a lot of money in the long run.
Go to our loan pages to see how this safe and affordable alternative is the better way to go.
Anyone who thinks they have been caught in a trap by a loan shark can contact the Illegal Money Lending Team confidentially on 0300 555 2222 www.stoploansharks.co.uk
What do we mean by financial well-being?
You hear this phrase all the time, but do you know what financial well being means and how you can achieve it?
Generally, the path to financial well-being is to having these four things:
How do we achieve a feeling of financial well-being?
Achieving a state of financial well-being requires that you examine what you want your life to be like; how you want to live, and what choices you need to make now and in the future. Using the SAM action steps helps you to think through your options and make informed decisions that fit your lifestyle and values.
Finally – what do you value?
Examining your values lets you clearly understand what matters most to you and why you set the goals that you do. The judgments you make begin to reveal patterns in your behaviour that are specific to you and your values; so when you begin to make the hard choices, remaining true to your values and goals makes the process much easier
Examining your current situation, knowing your values and setting realistic goals will help secure your financial future.
How are you feeling a year on?
Well here we are a year on from the start of the pandemic and, I don’t know about you, but I am beginning to feel there is a light at then end of this tunnel. Everyone I speak to has mixed emotions of excitement and caution.
Excitement because we have not been so close to being able to meet up with friends and family, get back to work or go on holiday. Cautious because it has been some time since we felt able to go about our daily business the precautions of masks, social distancing and hand sanitising.
Still open for business
We are proud that we have never had to close for business in the last year. Our branch may have had shorter opening hours, but use of our online services has more than doubled. Over 4,000 of our members manage their Hoot account via the App or member area. Members have had uninterrupted service during this time and we have had over 1,000 new members join us.
Are you suffering financially?
Sadly, many members have suffered financially during the year and have fallen behind with loan repayments. For those who have contacted us, we have been able to find a way to help them get through this difficult period. It may be just a short-term thing that we can help with; or if something more serious where we can point you in the right direction. If you find you have fallen behind, please don’t ignore it contact us; I am sure we can find a way to help.
Credit unions value their members and are here to help so we dislike taking any kind of action with regard to people who cannot pay their loan. The money you have borrowed comes from the savings pot of other members. We therefore have a responsibility to help you to pay us back. You should remember that, if you do not repay your loan, your credit rating will be affected and you may find it harder to get credit in the future.
Don’t ignore it
If you find you are getting overwhelmed with debt don’t be tempted to go to a debt management company or dive straight into an IVA without getting free advice first. Not doing this may cost you dearly and you could end of paying more to the DMC in fees than you are paying to reduce your debt. Contact an organisation that gives free advice such as Stepchange or Payplan who can help you to get the best solution for you, because they are not taking a fee.
Our help pages have lots of information about managing your money including contact numbers.
Finally, money worries are one of the biggest causes of stress. Make an appointment with your GP or go online to www.nhs.uk and type ‘money worries’ into the search box for advice Often just talking to someone about your worries helps a lot.
Did you know younger adults are more susceptible to financial scams?
I was very surprised to learn this week that 16% of 18 to 24 year olds surveyed by the Financial Conduct Authority’s Financial Lives survey had paid money out to a Covid-19 scam. This compares to just 1% of over 55s.
There are a lot of scams out there and it is upsetting to know that someone will always try to profit from others misfortune. The most common have been offering financial support, charging for the Test and Trace service or offering six months of free TV license. According to the FCA, 1.4 million people say they have paid money out as a result of a Covid scam. And, as you might expect, the most vulnerable of our society have been the worst hit.
I have put together some of the more common scams on our website Hoot Credit Union | Scams
To read the FCA Financial Lives survey 2020 go to Financial Lives 2020 survey: the impact of coronavirus
The key to protecting yourself against scams is to check thoroughly who you are dealing with, never give out personal information unless you are absolutely sure, and remember, if it’s too good to be true- it probably is.
Did you ever wonder why we call you members and not customers?
It’s because when you open an account with Hoot you are joining a special kind of business. We are a co-operative, which means that our account holders – members- own the business. This is not just a shareholding, it is an real stake in the business that provides the services you need.
As a member you get to share in success in the form of a dividend or share of the profit. You also get to elect your representatives, the Board of Directors, who are all members just like you. The Board is responsible for the strategic direction of the credit union, make sure it is managed well and that members interests remain at the heart of what we do.
This is how it works:
Hoot is a co-operative, community business offering ethical and affordable financial products to our members.
The money saved by members is pooled together and used to offer low interest loans. This is how we can offer an alternative source of credit at a fair rate of interest.
Members are encouraged to save for the future and in return, they receive affordable credit and access to low cost loans.
The interest received on the loans pays for the administration of the credit union with any surplus being put into reserves and, when possible, paid back to the members in the form of a dividend.
For this reason both savers and borrowers are essential to a successful credit union. Members know that by saving with Hoot they are benefiting other people in the community or workplace.
Have your say
We have a couple of Annual General Meetings coming up. Firstly the meeting to review the year to September 2019. This has been delayed because of Covid-19 (what hasn’t!). So this will happen online on Wednesday 27 January at 5pm. All members are invited to attend, find out about how well we are doing and elect your representatives on the Board.
If you have not already booked you can do so here.
News of the AGM for the year to September 2020 will be sent to all our members in March.
Finally, if you want to learn more about how being a member of Hoot benefits you and the community, download our social value report – The Owl Effect.
Over the past year, in the most difficult of times, Hoot staff have worked very hard to make sure service is not interrupted and members receive the best possible service.
Why wouldn’t anyone be proud of being part of such a community led organisation?
It’s hard to believe that it has been three months since the effects of lockdown started to bite.
Here at Hoot we are still busy supporting members and welcoming new members with both savings accounts and loans.
Many members have moved to online services and manage their account via the member area or the App, but we have managed to keep our branch open throughout the crisis. We have been putting into place new options for the small number of members who struggle to access us online and you should be hearing about some of those soon.
We still have some staff working from home, but that does not mean we have reduced our customer service options and we continue to take membership and loan applications. We are also looking at what our service options will look like post-Covid and exploring new ways that our members can reap the benefits of Hoot membership.
What about the next three months?
We don’t anticipate that our services will change in the immediate future and we will continue to support members with particular access needs as much as we can.
Time to start saving
Dare I say it, but only six months to Christmas so, now is the time to think about building up your savings pot. Whether it’s school uniforms, Christmas or the long awaited holiday next year, it’s think about the big ticket items in the next twelve months and work out what you can afford to save to help meet the costs.
Contact us via the App or at firstname.lastname@example.org and let us know how much you want to save and we will help you to achieve your goal.
30 years of credit unions in Bolton
July marks a huge milestone as credit unions will have been around in Bolton since 1990. Starting in Johnson Fold, then opening other credit unions in places like Breightmet, Hoot Credit Union has 5,500 members with savings of almost £1.8m.
Our plans for celebration have been curtailed because of the pandemic, but we will still mark the occasion in July with online activities and social media. Keep an eye out for this on Facebook www.facebook.com/hootcu , Instagram hootcreditunion or Twitter @hootcreditunion.
If you want to know how credit unions are about people helping people take a look at our FAQs
We will continue to support our members and hope you will continue to support us in providing affordable and ethical financial services.
Well we’re into week four of lock-down now, I hope you are all keeping safe and well.
I wanted to remind you, as a member-owner of Hoot, that we’re always here to serve you as best we can. I’d also like to take this opportunity to thank you for your continued support of the credit union, in what is a challenging and rapidly changing situation.
At Hoot we’re working with you, our members, to talk about what support we can offer at this difficult time.
You may have heard about a government scheme that offers three-month loan repayment holidays; however you should be aware that this does not apply to credit unions.
Hoot does not have access to any government funding.
Despite this we remain committed to helping our members where we can, but we need your support to achieve it.
How you can help us
Before contacting us please check out what other help is available; you can get some ideas here.
After you have looked at other options for assistance, if you still find yourself struggling because of a drop in your household income then do talk to us.
Please do not ask for payment breaks ‘just in case’. Only ask for assistance when you actually need it, and for no longer than needed.
How we will help you
At Hoot we’re committed to working with you, our members.
We might need you to answer a few questions online first, to allow us to assess your situation and figure out how we might best help. Once you’ve answered those questions we will contact you to discuss your options.
Please be aware that we can only agree to a repayment holiday if you can prove financial hardship, and you agree to keep a conversation going with us.
Please do not assume that you will automatically get a payment holiday. We need to assess your situation first.
We’re there for you
You know that at Hoot we’ve been there for you when you’ve needed an affordable loan, or when you’ve wanted to save for your future. We are still there for you; providing loans to those that need them, and supporting the most vulnerable members of our community.
Your money is always safe with us.
And for Hoot to be here in the future we need your ongoing support; we need as many of you to continue to save and to repay your loans.
I’d like to thank you once again for your support and understanding during this difficult time; we’ll get through it together. Please keep yourself and others safe.