This was in direct contravention of credit union rules which stated that only individual members could borrow, not organisations. The director, Reverend Carmel Jones, has been banned from the industry for overseeing this practice.
TPCU is based in Balham, London, with its 1,600 membership drawn from congregations of Pentecostal Churches. Before placement 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 them 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 twenty loans to the Church Organisation. 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. 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, said the FSA.
Tracey McDermott, FSA director of enforcement and financial crime, said: “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’ conduct fell short of the standards of integrity required by the FSA’s approved person regime. He has been declared unfit to hold this position and banned from the industry. Jones would have been fined £60,000 but for his financial circumstances.
The FSA said it considers TPCU to be an “exceptional case” and has issued a public censure rather than a fine, as it cooperated fully with the investigation and replaced its entire management at the request of the FSA.
