Credit unions ready to expand after rule change – Daily Business

Samantha Homer: allows credit unions to expand (pic: Terry Murden / DB Media Services)

More people will benefit from affordable loans and savings after a change in the limits imposed on credit unions.

The UK Government has raised the cap – or common bond – on the number of potential members they can serve from three million to 10 million, making it easier for them to grow and merge.

Samantha Homer, chief executive of Capital Credit Union in Edinburgh, told Daily Business: “We can now attract and support potential members across the UK. It opens up competition and co-operation within the credit union movement.”

The move was part of Labour’s manifesto pledge to grow the mutuals sector. Economic Secretary to the Treasury Lucy Rigby said:  “These reforms will help more people get access to affordable credit and a safe place to save, so families have a real alternative to high-cost credit.

“It’s another step in making financial services more accessible and supporting people to build financial resilience.”

The reforms will also allow students to join locality-based credit unions members will be able to stay with (or join) their credit union after retirement as full members.

The reforms follow the Call for Evidence on credit unions’ common bond rules launched after the Chancellor’s first Mansion House speech.

They also builds on the Government’s wider work to improve financial inclusion and resilience across the UK.

Sarah Harrison, chief executive of the Building Societies Association, said: “This is a practical change that will help credit unions grow and enable more people to access fair, straightforward financial services – both savings products and unsecured loans.”

However, there was some criticism of the move. Anita Wright, chartered financial planner at Ribble Wealth Management, said the government is encouraging people to take on more debt.

“The real issue is not access to credit, it is weak real incomes, declining purchasing power and an economy already carrying too much debt. Modern economies are trapped by excessive debt,” she said.

“Credit unions may offer fairer terms than payday lenders, and that is clearly a positive, but cheaper credit still leaves households borrowing against incomes that have already been eroded in real terms.”

As part of the Financial Inclusion Strategy, the Government is also working closely with the financial services sector and consumer groups to bring forward interventions to make it easier for people to access a bank account, support people to build savings and improve financial education. 

Daily Business will be publishing and interview with Samantha Homer

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