Mendip Community Credit Union

Mendip Community Credit Union is a not-for-profit savings and borrowing co-operative for people who live or work in the Mendip area of Somerset. It is owned by its members, each of whom has an equal vote in how it is run, and it is run entirely by volunteers¹. It offers two things: a savings account, called a share account, and loans. There is no lower limit on what you can save, and the only charge is an admin fee of £2 per year¹.

It is a small, local credit union rather than a bank. It has service points in Wells, Frome and Glastonbury, and members pay in by cash or cheque at a service point, or by bank transfer or standing order³. Loan decisions take 3 to 4 days, and the interest you are charged depends on how much you have saved⁴.

If you are looking for a credit union more generally, or want to compare what different ones offer, the credit unions guide sets out how the sector works. This page covers what Mendip Community Credit Union itself offers, who can join, how to apply, and what happens if things go wrong.

What Mendip Community Credit Union offers: savings and borrowing

All credit unions offer savings and loans, and Mendip Community Credit Union is no exception⁸. It describes itself as providing simple savings and affordable loans to people who live or work in Mendip¹. It does not offer current accounts, mortgages, credit cards or insurance.

The savings side is a share account. By saving with the credit union you become a member, and depending on what kind of year the credit union has had, you may receive an annual dividend⁴. There is no lower limit on the amount you can save¹.

The borrowing side covers a wide range of purposes. The credit union states it provides loans for household equipment and improvements, car repairs, holidays, school uniforms and much more¹. If you already have a loan with it and need to borrow more, it may be able to consolidate your loan⁵.

Larger credit unions sometimes offer extra services such as Christmas savings accounts, junior savings accounts, ISAs, budgeting accounts, current accounts, prepaid debit cards, insurance products and in some cases mortgages⁸. Mendip Community Credit Union does not list any of these, so if you want one of those products you would need a different provider. For savings products generally, see the savings guide; for borrowing, the loans guide.

Saving with Mendip Community Credit Union and how the dividend works

A credit union is not a bank and does not pay interest on savings in the way a bank does. Instead, the profit it makes is shared among savings accounts as a dividend⁸. Mendip Community Credit Union states that it pays members a dividend on their savings when it has made a surplus in the previous year⁴.

That word "when" matters. A dividend is not guaranteed and is not a rate you can rely on. The amount depends on how much you have saved and how much surplus the credit union has made after its expenses¹⁰. Other credit unions describe the same mechanism: remaining income may be returned to members as an annual dividend and loan interest rebate, with the rate varying according to the surplus after expenses¹¹. Dividends are normally paid once a year⁸.

You can save large or small amounts weekly, monthly or whenever you have spare cash⁴. If you save or repay a loan by standing order, you will receive an annual statement in October each year³.

Mendip Community Credit Union loans: what you can borrow for and how interest is set

The interest rate on a Mendip Community Credit Union loan is determined by the amount you have saved at any point⁴. That is a different basis from a bank, which prices a loan mainly on your credit record and the amount borrowed. Here, your savings record is central.

The credit union's own loan calculator assumes you have at least a quarter of the amount you want to borrow in savings, and it describes the result as indicative only⁵. In other words, the figure it shows is a guide, not an offer.

When it assesses an application, the credit union looks at how much you have saved in your share account, how long you have been saving, the amount and regularity of your recent savings or loan repayments, the purpose of the loan, and your income and expenditure if your payments need to increase significantly⁵. Other credit unions weigh similar factors: a regular pattern of savings, previous loan repayment record, the purpose of the loan, ability to repay, and how often you have applied¹³. Some credit unions will lend as soon as you become a member, while others will only lend after you have saved for a set period⁸.

Credit unions generally offer personal loans of up to about £3,000, and are willing to lend smaller sums than many banks¹⁴. The maximum interest a credit union may charge on a loan is 3% per month, a limit set by legislation in 2013¹⁵. Before 6 April 2006 the cap was 1% per month, inclusive of all administrative costs and other expenses¹⁷.

Charges: the annual admin fee and no penalties for early repayment

Mendip Community Credit Union charges an admin fee of £2 per year, and states there are no other fees¹. On loans, it states there are no charges for set up, renegotiation or overpayment¹⁸, and no penalties for paying off your loan early, renegotiating your repayments or overpaying¹.

That is a meaningful difference from many bank loans, where settling early can trigger an early repayment charge. Other credit unions take the same approach: Moray Firth Credit Union states there are no early repayment fees¹⁹, Pennyburn Credit Union charges no fees for early loan repayments²⁰, and Oldham Credit Union charges no extra for early repayments²¹.

The £2 admin fee is a flat annual charge for running your account, not a charge on each transaction, and the credit union states there are no other fees¹. Loan interest is worked out from the amount you have saved rather than from a published rate card, so the cost of borrowing varies from member to member and changes as your savings grow⁴. The credit union's own site carries its current loan figures and its calculator; check there before you apply, because the figures are not fixed here.

Who can join: living or working in the Mendip area

Membership is open to anyone who lives and/or works within the Mendip area in Somerset⁶. This is what credit unions call a common bond: all credit unions in the UK may only accept members who have one²². The common bond is what ties members together, whether that is a place, an employer or an association.

To join, you need proof of your identity, recent proof of your current address, and a document with your National Insurance number⁶. You complete a form and the credit union will contact you for a chat⁶. Other credit unions ask for similar evidence: Pennyburn Credit Union asks for valid photo ID and proof of address dated within the last three months²³, and Bacup Credit Union asks for photo ID such as a passport, driving licence or bus pass, proof of address such as a utility bill or bank statement, and proof of National Insurance number such as a payslip or benefit letter²⁴.

You must be a member of a credit union to get a loan from it¹². If you are not sure which credit union covers your area, the Find Your Credit Union website can help you locate one⁸.

How to apply for a loan and how the decision is made

You can complete a loan application form by visiting your nearest service point, emailing the credit union, or leaving a message on its answer phone⁵. Existing members are sent a part-completed form to check and sign⁵.

Unless your loan can be repaid by a pre-existing savings or loan repayment pattern, you will be asked to complete a budget⁵. That budget is how the credit union works out whether the repayments are affordable. Credit unions generally check affordability against the money you have left after paying your bills⁸.

The decision takes 3 to 4 days⁵. Other credit unions vary widely: South Manchester Credit Union decides Family Loan applications within 2 working days²⁶, Pennyburn Credit Union typically decides within 1 to 2 working days²⁰, Enterprise Credit Union makes most decisions within 3 working days but can take up to 7 when busy or complex²⁷, and Moray Firth Credit Union says it may take at least a week for its credit committee to decide¹⁹. Some credit unions decide loans at a weekly committee meeting²⁸.

A poor credit history does not automatically rule you out. Mendip Community Credit Union states that if you can demonstrate you can afford the repayments, a poor credit history will not exclude you¹. Credit unions generally provide access to fair and affordable credit for people with a poor credit history, and help those who cannot access mainstream forms of credit²⁹. Moray Firth Credit Union makes the same point: a poor credit history or a refusal from another organisation does not necessarily mean the loan will be refused³⁰.

Paying in, repaying and withdrawing your savings

You can pay in by cash or personal cheque at one of the service points, or by bank transfer or standing order³. When you pay by bank transfer, use your National Insurance number as the reference so the payment can be allocated to your account³. Other credit unions use different references: East Kilbride Credit Union asks members to quote their member number and surname³¹.

You can save weekly, monthly or whenever you have spare cash⁴. Loan repayments can be weekly, fortnightly or monthly¹⁸. Setting up a standing order from your current account to your savings account is the usual way to save automatically each month³².

A standing order is an agreement between you and your bank, and the credit union cannot alter it³. If you want to change the amount or date, you contact your own bank.

Withdrawing savings works differently depending on whether you have a loan. If you have no loan, you can withdraw your savings, and the credit union will normally process a share withdrawal within five working days, often quicker³. If you have a loan, you must keep at least 25% of your current loan balance in your share account³. That money stays as security until the loan is repaid.

To withdraw by email to the account of a current standing order, the email needs to confirm your name, address and the last four digits of your bank account. Other withdrawals need a signed form³.

Service points in Wells, Frome and Glastonbury

Mendip Community Credit Union runs three service points, all open on Saturdays⁶:

Because the credit union is run entirely by volunteers², opening hours are limited, and it is worth checking before travelling. The credit union states that it is rare for any query not to be dealt with within two working days³.

If you fall behind or want to complain

If you have financial difficulties, the credit union's stated approach is to work with you. As long as members talk to it, keep in touch and honour renegotiated agreements, it will not take legal action². It also states that provided you stay in touch and continue to make payments in line with your renegotiated repayments, it will not take legal action to recover arrears³.

That protection depends on you staying in contact. If you miss payments on a loan, the credit union may be able to use your savings to repay the loan³³. That is why the 25% share retention matters: your savings are not entirely separate from your borrowing.

If you want to complain, the credit union will respond within 5 working days³. If you are not satisfied, you can take the complaint to the Financial Ombudsman Service, but the Ombudsman will not respond to your complaint unless you have raised it with the credit union first³.

More generally, you have the right to complain to your lender if it gave you credit irresponsibly and you are now struggling financially as a result³⁴. If you are dealing with problem debt, free and impartial help is available from charities including StepChange and National Debtline, and the debt guide sets out the options.

How your savings are protected

Savings with Mendip Community Credit Union are fully covered by the Financial Services Compensation Scheme⁴. Credit union loans and savings are protected by the FSCS²⁹, and all shares (savings) in an affiliated credit union are eligible for protection under the scheme³⁵.

The credit union appears on the Bank of England's list of credit unions incorporated in the UK³⁶. The FSCS protects eligible deposits, and Enterprise Credit Union states that savings are safeguarded by the FSCS up to £120,000⁷. If you hold savings with more than one credit union, each is a separate firm for this purpose, so the limit applies to each one separately. If you are unsure how much of your money is protected, the consumer protection guide explains how the scheme works.