Priority or Non-Priority Debt: Credit Union Loans
They are usually non-priority debts but it can be in your best interests to treat credit union debt differently.
You may be reluctant to make reduced payments because it is your only form of affordable credit. The credit union may also ask to be treated differently and this might not be appropriate. This can confuse you and advisers: Some credit unions may say that the repayments should be prioritised, or say that they may not accept token repayments; they may threaten to bar members who are in arrears from membership services such as Christmas savings schemes. However, a referral is required internally to a debt adviser.
'The credit union applied to the DWP for deductions from benefits. I am struggling as a result.'
Credit unions in the UK recover debts through a structured process, beginning with direct contact to arrange payment plans, utilizing "offsetting" (taking money from a member's savings), and, as a last resort, using legal action such as County Court Judgements (CCJs), bailiffs, or deductions from benefits.
Common Debt Recovery Methods:
Direct Contact: Initial attempts involve letters, emails, or phone calls to set up a new repayment schedule.
Offsetting (Right of Set-off): Credit unions have the legal right to use a member’s savings (shares) to pay off outstanding loan arrears.
Deductions from Benefits: For borrowers on benefits, the Department for Work and Pensions (DWP) can make deductions to pay off a credit union loan if the borrower has failed to make payments for 13 weeks and the union has sent proper, documented warnings.
Debt Collection Agencies: Uncooperative members may have their debt passed to external agencies.
Court Action: Credit unions may take members to court for a County Court Judgement (CCJ) to secure the debt.
Attachment of Earnings: A court order forcing an employer to deduct payments directly from wages.
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