HISTORIC PRESS RELEASE : Credit Unions get improved powers to help tackle financial exclusion [March 2001]

The press release issued by HM Treasury on 12 March 2001.

Help with debt and easier access to mortgages for the financially excluded will be available from 1 April under measures to boost credit unions, Economic Secretary Melanie Johnson announced today.

Savers, including young people, will also benefit from steps towards deregulation of credit unions. These include :

• increasing the savings limits for young people to £5000 – the fixed limit for adults.
• enabling all credit unions to offer secured loans for seven years and unsecured loans for three years, helping members with debt problems.
• enabling credit unions meeting stricter regulatory requirements to offer secured loans for 12 years and unsecured loans for five years, helping members seeking longer loans, eg for house purchase.

More flexible loan periods permit credit unions to offer easier repayment arrangements to their members. This should assist some of the larger credit unions to offer more substantial loans and increase their capacity to offer mortgages.

Welcoming implementation of the proposals on 1 April, Miss Johnson said :

“This is good news for everyone, but particularly the financially excluded, for whom credit unions offer alternative access to financial services. These measures mark an important step towards improving the service which credit unions are able to offer savers and borrowers.

Enabling them to save more will encourage young people to join credit unions and get used to planning and managing their finances sooner. Greater loan flexibility will make it easier for credit unions to help members overcome personal debt problems and to compete for mortgage business.

Credit unions are an effective way of widening access to affordable credit and savings opportunities to those who cannot or do not want to deal with mainstream financial services providers. The movement is growing and there are now around 700 credit unions in Britain with assets of over £200 million.

We wish to see the movement grow and to realise its potential. But individual credit unions must be effectively managed and offer appropriate safeguards to make them attractive to those looking for better ways to manage their money and financial affairs.

The measures which will come into force next month will ease the regulatory burden and help the credit union movement to grow further and faster and attract more members.”