THE WESTERN CANADIAN LUMBER WORKER There was an age when people either owned what they used or went without. Times have changed. Today many people rent homes. Some rent cars, trailers, tools, tuxedos. When you ride in a taxi, or an airplane, you are renting space and service. When you call the plumber or the physician you are renting his time and talent. Rent- ing is a part of modern age. Nearly everyone today rents money at some time or other. To buy a coat or a car or a cottage. Some are willing to rent money only for big items. Others are willing to pay a little rent so they and their families might enjoy a better life now. Fifty years ago the common man could borrow only from his own relatives or from the loan sharks. The hopeless and helpless working man was out! Bankers wouldn’t listen nor lend. The money lenders bled his purse and person with exorbitant interest rates. A new day dawned. Half a century ago the first credit union began in this country, founded on the humanistic concept of the dignity of man, human democratic process, free enterprise. Credit buying is an ac- cepted fact in our North American society and forms the backbone of the North American economy. A recent immigrant—when questioned on his likes and dislikes — remarked “It is a wonderful feeling to be able to buy things I don’t need with money I don’t own.” In all seriousness, however, the festive season is almost upon us and if the past is any indication, millions of Cana- dians' will purchase gifts worth millions of dollars and will use credit facilities to finance these purchases. In order to try and protect IWA members from exhor- bitant finance charges the Lumser WorKER did some re- search on the subject matter of the cost of borrowing money by contacting Mr. E. A. Thielmann of the IWA (New Westminster) Credit Union and Mr. J. Francis Quail of the Stry Credit Un- ion, whose information forms the background of this article. At the end of 1965 con- sumer credit in Canada (which does not include real estate or business loans, but personal chattels, TV sets, ra- dios, cars, ete.) totalled over 7% billion dollars , with an average annual cost of about 20%. This puts the cash cost at 1% billion dollars a year, which is exactly what we put into defence spending last year! If that isn’t clear enough, it is costing Canadians 9 bil- lion dollars a year to purchase 7% billion dollars worth of goods! With a population of 20 million people, the consumer loan total averages out at $350.00 for each man, woman and child in the country. Add 20% to that, and you have an annual expenditure of $420.00 each to purchase $350 worth of goods. In other words, as the cost of consumer goods increases because of the credit charges, we can only buy a reduced number of them, and this automatically affects the peo- ple whose job is the produc- tion of those commodities. Failure of Atlantic Accept- ance Corp, to meet its short term liabilities caused a tre- mendous lack of confidence among investors in the money market and helped to acceler- ate the present high-cost money situation. Collapse of the Prudential Finance Corp. and some of its related com- panies didn’t do anything to restore that confidence, and the loss to the economy will probably be around $120 mil- lion and $20 million respec- tively. People are becoming aware of some of the inconsistencies and dangers of some aspects of our type of money market, and are starting to ask perti- nent questions. This is an ex- cellent situation and _ one which can lead only to more interest by ordinary people in our financial system. They are beginning to real- ize that the basic difference between credit unions and other financial organizations is simply one of control. A credit union doesn’t take any- thing for granted—it relies on the interest of its members, some of whom are its officers, for its own survival and in re- turn offers a measure of fi- nancial independence. They will continue to function as long as there are abuses of our financial system, and one of the most blatant abuses is the refusal by some commer- cial institutions to tell the truth about interest rates. Many people believe credit unions are simply co-opera- tive finance companies, but this is not so. All a credit un- ion can really offer anyone is the truth and the right to have a voice in the control of his own financial affairs. It is a measure of the power of ad- vertising that here in B.C. only 17% of our population are credit union members, while the balance of the prov- ince’s borrowers go to the commercial institutions. They have a free choice, of course, but as long as they wish to exercise that choice, they should at least be given the correct information about rates. Even if you don’t particu- larly believe in the self-help philosophy of credit unions, the chances are you can save money simply by using their services. : ‘ two respects: WHAT IT IS A credit union is a unique self-help financial institution, providing savings and lending service to its members. Mem- bers save in it. They borrow from it at low cost. They use it to meet their financial needs, independently and out of their own resources. THE DIFFERENCE Credit unions differ from other financial institutions in (1) Corporate- ly, (2) Philosophically. A credit union is a self-help or- ganization, owned and oper- ated by its member-owners in the interests of the member owners. Each credit union is owned and controlled by the people it serves. And only the members may use its services or share in the benefits pro- vided by the credit union. LICENCE NEEDED In Canada all credit unions operate according to provin- cial law. Each credit union must be chartered and oper- ate. under the Credit Unions Act. THE OPERATION Every credit union is oper- ated by a Board of Directors and committees, elected by the member-owners. DIRECTORS All Directors and members of major committees are elect- ed by the member-owners at Annual Meetings. The Direc- tors are in charge of the affairs of the credit union during the year. They are usually elected for three years in staggered terms so that at all times a majority of the Board has one or more year’s experience. COMMITTEES Most credit unions have three committees: (1) Supervisory Committee — which is elected to act as the auditors of the credit un- ion. Members of the Super- visory Committee must, not less frequently than once each year, make an examination of the accounts of the credit union and report to the mem- bers of a credit union at the Annual Meeting. If the credit union’s accounts are audited Small loan companies —...... CURRENT B.C. LOAN RA 16.8% to 25.6% —no life insura Dept. stores, ete. 18.0% to 26.0% — no life insura Sales finance companies 17.0% to 68.8% —no life insura Food freezer plans, etc. 18.0% to 30.0% — no life insura Chartered banks _......... Credit unions ___....._--_.. 6.0% to 12 TRUE INTEREST FORMU 2 ¥C (N+1)M = I Y— Number of payments in a year C — Total cost N — Number of payments in contract M — Actual money received I — True interest rate Example One— If you borrowed $100.00 for one year, paid $6.00 interes 12 equal monthly payments the rate would not be 6%, To f formula would be used as follows: Example Two— 2 Ey is 2x12 6 144 1300 =— = lL! Catalogue sales usually carry a finance charge of arount Take the example of the store advertising $100.00 to be fina service charge of $13.75. Apply the formula: Example Three— 2X 12 X $13.75 14-+1 x $100 300.00 = = 22 1500.00 One Finance Company shows on one of its contracts | tween the price of a purchased car and the allowed value o to be financed with the $124.50 repayable in six monthly | charge of $25.00. Apply the formula: 2X 12 x $25.00 600.00 (6 + 1) X $124.50 8715.00 Example Four— =a LW.A. (New Westminster Credit Union: $2500.00 repaya Apply the formula: by a chartered accountant, certified general accountant, or other qualified auditor ap- proved by the Inspector of Credit Unions and appointed by the member-owners at the Annual General Meeting, a credit union does not have a Supervisory Committee. - (2) Credit Committee — is elected by the membership annually and has sole power to approve loan applications and authorize the making of loans. Credit unions with as- sets of more than one million 2X 12 x 755 (60 + 1) 2500 18120 ed 152500 dollars may have Credit Com- mittees appointed by the Board of Directors. Such cred- it unions have a “loan officer” who is responsible for making loans to members. (3) Education Committee— which has the responsibility of making the credit union and its services known to the members and potential mem- bers. Unlike the Credit Com- mittee and Supervisory Com- mittee, the Education Com- mittee, in British Columbia, is not required by law.