Carpetbaggers looking for windfalls?

The Catholic with a single branch in London and only eight staff is planning to merge into the Chelsea, one of the largest remaining mutual lenders.

This is a reflection of the difficult trading environment and increased financial regulations which small organisations are struggling to keep up with.

Experts predict this will be the first of a few merger deals to take place as other small societies look at their costs. It’s not just the smaller societies that are under pressure, even larger societies such as the Cheshire and Derbyshire may be open to merger offers after being hit by specialist lending problems and not moving with the times.

The Catholic was set up 50 years ago and specialised with offering loans to single women. These sector minnows usually only have a few hundred borrowers and a few thousand savers.
It is expected the existing customers with the Catholic will be offered cash bonuses for agreeing to the merger – likely to be £100 or £200.

But it is too late to open an account now and get this windfall. Only customers with an account as at 31st May 2008 will be eligible. It is also common practise that only members of the small society in a merger are given a payout.

The prospect of further mergers is likely to see a new round of account opening , known as “carpetbagging”, as people speculate which societies may be in line for a merger.

Savers can become members of most societies with a deposit of just £100 but some may have restrictions such as only accepting local residents. Most also require savers to sign away any rights to windfalls resulting from demutualisation for the first 5 years, but this sign away does not apply to merger bonuses.