Yahoo Finance High Street Giants Back Retail Credit Venture
A new credit union for the employees of some of Britain's biggest retailers is finalising plans to launch after gaining a green light from City regulators.
Sky News understands that the Prudential Regulation Authority (PRA) earlier this week authorised RetailCure to open for business, a move which could affect the way that more than 4.5m people who work in the industry manage their finances.
Sources said on Friday that the John Lewis Partnership, Pets at Home (LSE: PETS.L - news) and Schuh - which collectively employ tens of thousands of people - had signalled an intention to join New Look, Next (Other OTC: NXGPF - news) and Rymans as backers of the new scheme.
RetailCure, which is being sponsored by The Retail Trust, the industry charity, is chaired by John Lovering, a serial chairman of big retailers such as Debenhams (Other OTC: DBHSF - news) and Maplin Electronics.
Its chief executive is Matthew Smith, a former HSBC banker who has led the year-long process of securing approval from regulators.
RetailCure, which is expected to begin providing credit to members early next year, will promote savings with deposits at non-derisory rates and provide "affordable and appropriate lending opportunities", according to a source close to the project.
It (Other OTC: ITGL - news) will also offer a range of financial education to members, they added.
The initiative is designed to provide retail industry workers with an alternative to the frequently high interest rates charged by payday lenders.
Although the National Living Wage will raise salaries for many people in the sector - half of whom earn less than £8 an hour - many retailers believe there is a pressing need for a venture such as RetailCure.
Technology will be at the centre of RetailCure, with the credit union using digital and mobile platforms, and being the first to use a new IT platform called Agiliti.
"The philosophy is to be decent, straightforward, supportive and transparent, and we hope to represent an affordable, ethical alternative to high-cost loans providers, particularly for the financially vulnerable," said a source involved in the project.
Speaking to Sky News last year, Mr Lovering said: "The industry feels that we have to find a way of providing a source of cheap, reliable credit for our people.
"The three million in retail and the nearly five million in the wider industry do have a need for low-cost, value-for-money, short-term borrowing facilities, and that's what we as an industry are trying to provide."
Mr Lovering said last year that he expected the average loan request to be less than £5,000, and believes that RetailCure could ultimately become Britain's biggest credit union.
"We think we can build a loan-book of £50m and attract 50,000 members relatively quickly," he said.
Savers who deposit funds with RetailCure will be protected by the same Government guarantee as that which covers high street banks - which is being reduced from £85,000 to £75,000 as part of a politically contentious move inspired by European Union rules.
Earlier this year, the Bank of England outlined reforms to the way credit unions are regulated to reflect the broader range of financial services that many of them now offer.
“We support a diverse system enabling competition," said Andrew Bailey, the PRA chief executive.
"These changes will introduce a more risk-based and flexible regime for credit unions, with prudential standards that reflect the diverse business models they now operate. The new rules will raise standards where required."
