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FSA censures church credit union over £1.2m loans

FSA Letters 480

The FSA has publicly censured The Pentecostal Credit Union for issuing loans worth £1.2m under its members’ names but channelling the money to a church.

Only individual members can borrow from credit unions, not organisations, and the director, Reverend Carmel Jones, has been banned from the industry for overseeing the practice.

The credit union is based in Balham, London, and has 1,600 members drawn from the congregations of Pentecostal Churches.

The FSA says it would normally impose a fine but has taken into account the “important role of credit unions” and the impact of any fine on TPCU’s members.

It says there may be future cases where it will be appropriate to fine a credit union but it considers this an “exceptional” case because TPCU cooperated fully with the investigation and replaced its entire management at the request of the FSA.

Before coming under FSA regulation in 2002, TPCU was making regular loans to the church organisation for property purchases and repairs.

After a routine assessment in 2003, the FSA warned it to stop this practice with immediate effect because the loans may not be legally enforceable.

In 2006, Jones wrote to the FSA proposing to reinstate the loan system with either insurance indemnity for its members or the establishment of a corporate entity of which they would be shareholders.

The FSA warned Jones that both of these suggestions were unlawful but between May 2007 and July 2011, TPCU made 20 loans to the church.

None of the loan applications had the members’ income verified, none of the members were issued with the full terms and conditions of the loans and TPCU has been unable to prove that any of the loans were approved by its credit committee.

The FSA says TPCU’s failings exposed its members to an excessive risk of financial loss.

Jones signed and approved 14 of the 20 loans in question, and in 12 cases signed the cheques for the loan money, none of which were made out to the individuals purportedly taking out the loans.

The relationship between TPCU and the church organisation broke down at the end of 2009 and the loan repayments stopped. The estimated amount outstanding is in excess of £670,000. 

FSA director of enforcement and financial crime Tracey McDermott says: “This is a disgraceful case of a credit union putting the interests of another organisation before those of its members. The FSA will not tolerate this conduct in the industry.

“Credit unions are vital institutions for the communities they serve and the members of The Pentecostal Credit Union deserved better.”

Jones has been declared unfit to hold his position and banned from the industry. He would have been fined £60,000 but for his financial circumstances.


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There are 13 comments at the moment, we would love to hear your opinion too.

  1. Clearly there are in fact benefits to having imaginary friends in high places…

  2. Wonder if the Reverand ever took the RO1 exam!!

  3. Presumably, the FSA would have levied a fine, had it not been in fear of divine retribution?

  4. @James

    I suspect that its regulated activities do not make reference to imaginary friends or sky-based deities; as to do so would fall foul of the financial promotion requirements to be “clear, fair and not misleading” …….

  5. And the outstanding £670k in loan repayments …………??

  6. Surely this should have led to criminal proceedings. Those involved knowingly made payments that were unlawful and, it would appear, a significant amount of money has been lost.

    I can see that fining the credit union may not result in the best outcome for the consumers that have used the individual credit union (although this could be argued for other types of institutions as well).

    And as for not fining the Reverend Carmel Jones because of his financial circumstances, I’d be very interested to understand how that is assessed.

    It seems that he is escaping any real punishment for his crimes.

  7. I accept that it’s not worth fining someone who has no funds to pay a fine with but could they not have sent him to prison? Failing that – levy the fine anyway and make him bankrupt.

    Mind you, “Pentecostalism is energetic and dynamic. Its members believe they are driven by the power of God moving within them.”. Clearly not the Reverend’s fault then!

  8. The FSA dont fear divine retribution they are above that hadn’t you heard!!

  9. “The FSA says it would normally impose a fine but has taken into account the “important role of credit unions” and the impact of any fine on TPCU’s members.”

    …..but FSA fine and ban individuals and firms (big and small) with no consideration of what role they might play. Are they saying that one organisation’s role is more important than others? Since when has this been a factor? Another bizarre decision…..

  10. How unlike the goings on in our own dear Church of England, with a former Corporate Treasurer at the helm now thinks will go from strength to strength

  11. What’s the difference between the FSA and God?

    God doesn’t think He is a regulator…………….

  12. Disgraceful. This Union is not too big too fail.

    “pour encourager les autres”

    Also the manager of their website done’t appear to have received the message that Jones is no longer in charge.

  13. If there is £670k outstanding, loan repayments have stopped and there is ao liklehood of it never being repaid, then what happens if the depositers want to remove their money? Surely the credit union then collapses and the FSCS has to frepay the depositers (under FSCS deposit limits at up to 85k per person) That means every individual gets repaid ALL their deposits, BUT in turn that means the deposit taking section of the FSCS levy payers the ger hit.
    I don’t know if the credit union section is deperate from banking and building socities, if it is, that is a lot for the otehr unions to pick up. If it is combined with banks & BS, then that means that due to the FSAs failire to resolve the problems at this credit union for about a decade, individuals will have to pay. If this has not been sorted out by the FSA for nearly a decade, it is NOT the legal entitiy known as the FSA which has been at fault, but individuals at the FSA who have failed to resolve the problem. Why haven;t they?
    Was Hector Sants or someone else a member of the same church group?

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