New documents reveal problems at East London Credit Union prior to its collapse, reports James Cracknell
Half of a £500,000 grant Waltham Forest Council agreed to give East London Credit Union (ELCU) was withheld three years before it entered administration, it has emerged.
ELCU went bust in September 2019, with several thousand members having to be compensated by the Financial Services Compensation Scheme (FSCS) as a result.
Documents obtained under Freedom of Information laws by investigative blog Waltham Forest Matters have since uncovered details of the financial assistance offered to the credit union by the council in 2015/16.
The grant, worth half-a-million pounds, was made for the purpose of assisting ELCU develop online platforms, provide loan capital to local residents and businesses, and increase its marketing and engagement activities.
However, £240,500 of the grant was never transferred to ELCU, after it apparently failed to meet a number of “key performance indicators”. Monitoring documents also show new banking software purchased by the credit union using its council grant “did not come equipped with business loan functions”.
Last year the Walthamstow-based credit union ceased trading after a planned merger deal collapsed – leaving 5,500 members without access to their savings. FSCS later stepped in to provide up to £85,000 in compensation per person, with around £2million provided in total to out-of-pocket ELCU members.
In a statement following the collapse the council explained that it had “previously given financial support to ELCU over several years” but “the cost of funding this merger would have been too high to make it viable”.
The discovery that the council withheld half of its £500,000 grant to ELCU three years before its collapse suggests the local authority was aware of issues with the credit union’s financial management long before it failed. Councillor Paul Douglas, currently the council’s cabinet member for culture, had previously served as a director on the board of ELCU.
Questions have also been raised over the credit union’s accounting records, with the Financial Conduct Authority (FCA) listing just one set of finalised accounts for ELCU between the years 2011 and 2019 – something it was required to file with the FCA by law.
A council spokesperson said: “The £500,000 grant was laid out against contractual milestones and targets. £240,500 was withheld as ELCU failed to achieve some of the milestones and targets agreed within the contract.”
Cllr Douglas did not respond to a request for comment.