TITLE : Employee Car Loan Scheme – Members’ Update
TO / ON : Audit Sub-Committee 12 March 2003
FROM : Director of Finance & E-Government
STATUS : FOR PUBLICATION
1.0 TYPE OF DECISION
1.1 What type of decision is to be taken:-
EXECUTIVE DECISION COUNCIL DECISION
Key Non Key ?
1.2 If a key decision, has it been included in the Forward Plan
Inclusion in Forward Date of
2.1 This report updates Members on the performance of the Authority‟s car
loan scheme and responds to specific queries raised by them at previous
meetings of the Sub-Committee.
2.2 The report also presents a case to consider if a major review of the
scheme is necessary at this time.
3.0 OPTIONS AND RECOMMENDED OPTIONS (with reasons)
3.1 To recommend that a major review of the Employee Car Loans scheme be
undertaken taking into consideration the issues raised in this report.
3.2 To note the contents of this report and indicate any further action or
3.3 Reject the report.
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4.0 THIS REPORT HAS THE FOLLOWING IMPLICATIONS
Corporate Aims The Car Loans scheme supports all the Corporate
Aims but specifically the Aim of Improving the Quality
and Availability of Council Services
Policy Framework The Car Loan scheme supports the achievement of all
the Council‟s Policy Objectives
Statement by Director Key financial statistics relating to the operation of the
of Finance and E-scheme are set out in the report Government
Human Resource The HR implications are set out in the report
IT/Land and Property
Wards/Area Boards All
Scrutiny Panel's Resource Scrutiny Panel Interest
Consultations None at this stage
Call-in Not applicable at this stage
Briefings Executive Members/ Chief ? Chair Executive
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5.1 This report provides a current update of the car loan scheme and attempts to thaddress the ongoing concerns raised by Members at the Audit Sub-Committee on 25
September 2002, regarding its operation.
5.2 Members have specifically been concerned with the absence of any form of credit
checking prior to the approval of a car loan and the levels of write-offs that are being put
forward in respect of defaulted loans.
6.1 Conditions relating to the operation of the employee car loan scheme fall under
section 152 of the Local Conditions of Service, “Assisted Car Purchase Scheme”
(NC63 „c‟ and Appendix F).
6.2 The management and administration of the employee car loan scheme is
delegated to the Director of Finance & E-Government.
6.3 As the terms & conditions of the employee car loan scheme are embodied in the
Terms & Conditions of Employment, any amendment of the terms & conditions of
the scheme are subject to consultation and agreement with the various Unions and
elected Members. There is, therefore, no general power to amend them, however,
the Director of Finance & E-Government does have delegated authority to
6.4 The scheme was widened to include all permanent employees of the authority in
1992, in an attempt to increase take-up of car loans when volumes were at a low
6.5 A comprehensive review of the car loan scheme was implemented in September
1995, when extensive consultation was carried out between the Management, Unions and
elected Members. At that time Members felt that the proposal to conduct „credit checks‟
was not conducive to good employee / employer relations. A management proposal to
introduce a scheme of insurance, to cover defaulting in payment of the car loan, was also
dismissed for the same reasons.
6.6 Various minor amendments to the scheme were made in March 1996 and the
scheme has operated in its current format since that time.
6.7 A comparison exercise in respect of the operation of in-house car loan schemes
was undertaken with the ten other Greater Manchester Authorities in September
2001 and the following conclusions were drawn:
6.7.1 Bury MBC does not undertake any form of credit checking prior to, or during the
consideration for a car loan, this is also the case for the other ten Greater
6.7.2 Bury MBC does not have an insurance policy in place to minimise losses incurred
in any defaulted loans. There is a policy in place, where staff can voluntarily pay
0.5% of the value of the loan as a one-off premium to re-pay the loan in the event
of death in-service. Of the ten other Greater Manchester Authorities, Oldham and
Tameside Councils both have mandatory insurance policies, whilst Wigan has a
mandatory death in-service bond applied to all loans.
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6.7.3 All permanent employees of Bury MBC are eligible for the employee car loan
scheme and Bury is the only Greater Manchester Authority whose scheme is
applied so widely. Of the ten other Authorities, eight restrict the scheme to
designated essential and casual users, whilst two Authorities restrict it further to
just designated essential users.
7.1 Analysis over the last three years, shown at APPENDIX A, demonstrates that the
number of car loans is falling quite significantly, from 590 in 2000 to the current number of
426 in 2003. From employee feedback it is suspected that the reason for this decline is
connected to the high interest rates being charged (8 ?% to 9 ?%) in the Authority
scheme, combined with low interest deals available in the market place, particularly
associated with the purchase of new cars.
7.2 Appendix A also shows that the levels of write-offs that are being submitted to
Council are in an upward trend. These write-offs are mainly in respect of former
employees that have absconded without trace or are subject to a bankruptcy order. The
notes to the appendix report 3 bankruptcies that have been written off and a further
bankruptcy that is about to be submitted.
7.3 Despite the downturn in demand for the scheme and upturn in amounts being
written off, the scheme contributes an estimated ?237,500 to General Fund balances
over the three year period.
7.4 It is now some 7 years since the last major review of the scheme and there are
several indicators suggesting that a further major review is now needed. These are:
a) To address the decline in participation in the scheme;
b) To address the upturn in accounts being written-off in the scheme;
c) To address elected Members‟ concern over the absence of any kind of „credit
checking‟ prior to advancement of a loan under the scheme.
d) To incorporate the terms of lending under the Consumer Credit Act 1974 into
e) To incorporate lending against the purchase of Motor Cycles into the scheme.
8.1 It can be concluded that participation in the Car Loan scheme is dwindling, as it
was in 1992 which prompted a major review of the scheme and levels of write-offs within
the scheme are approaching levels that are giving cause for concern. These two issues in
themselves make a good case to prompt a major review of the scheme.
8.2 In a review, consideration can be given towards reviewing the levels of interest
charged (to make the scheme more competitive and attractive).
8.3 The scope of the scheme can be considered, balancing the issues of dwindling
numbers and also the level of write-offs being experienced.
8.4 Pre-loan credit checking and mandatory loan repayment insurance can also be
8.5 The financial analysis within the report shows that the scheme is making a
significant contribution to General Fund balances and any effects on this must be
borne in mind in any proposed changes to the scheme.
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8.6 A review must be undertaken to incorporate compliance with the Consumer Credit
Act 1974 into the scheme, and it is an aspiration to widen the scheme to
encompass loans for the purchase of motor cycles, which could be achieved in the
8.7 As the scheme is embodied in the Terms and Conditions of employment any major
review of the scheme must encompass a full consultation exercise with employees,
trade unions and elected Members.
Director of Finance & E-Government
Notes held within the Revenues Files
Report to Policy & Resources Committee 19/09/95 „Employee Car Loan Scheme‟ Report to Personnel Sub-Committee 5/12/95 „Employee Car Loan Scheme‟ Report to Personnel Sub-Committee 19/3/96 „Employee Car Loan Scheme‟
For further information on the details of this report, please contact:
David Chapman, Revenues Manager 0161 253 7020
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Employee Car Loan Scheme - Members Update
2000/01 2001/2 2002/3 Overall
Number of loans 590 528 426
Value of loans ?2.81M ?2.43M ?1.89M
Interest Received ?267,29 ?236,00 ?173,46 ?676,76
1 8 8 7 Admin Fees ?4,455 ?3,700 ?2,385 ?10,540 Bond Fees ?2,642 ?2,107 ?1,383 ?6,132
?274,38 ?241,81 ?177,23 ?693,43
8 5 6 9
Less Interest if ?165,64 ?124,53 ?89,775 ?379,95invested 4 8 7 Staff costs ?8,200 ?9,000 ?10,000 ?27,200 Other costs ?2,300 ?2,500 ?2,700 ?7,500 Gross profit ?98,244 ?105,77 ?74,761 ?278,78
Less Write Offs ?6,971 ?3,102 ?31,240 ?41,313
Net ?91,273 ?102,67 ?43,521 ?237,46profit 5 9
Bankruptcies included in the above write-off figures
2000/1 1 case ?6,971 2001/2 1 case ?3,102 2002/3 1 case ?5,470 (a further case about to be submitted - ?6,920)
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