HISTORIC PRESS RELEASE : More Credit for the Credit Unions – Proposals published to help Credit Union Movement develop [November 1998]

The press release issued by HM Treasury on 16 November 1998.

Proposals Published to Help Credit Union Movement Develop

A package of measures to boost credit unions and help those less well-off in our communities has been announced today by the Economic Secretary, Patricia Hewitt.

In a consultation document, “Proposed Amendments to the Credit Unions Act 1979”, a series of measures are set out which aim to help expand the credit union movement while maintaining its focus on the poorer members of society.

The measures are:

• allow credit unions to borrow from external sources,
  other than authorised banks and other credit unions e.g. building societies, insurance companies;
• allow credit unions to offer interest bearing share accounts;
• allow credit unions to charge fees for providing basic
  services e.g. bill payments;
• abolish the #750 maximum limit on youth accounts, bringing it into line with the #5,000 adult limit, and lower the minimum age for joining credit unions;
• make the common bond requirement more flexible i.e. the “living or working” rules which allow people qualifying to join a credit union;
• remove the current 5,000 maximum membership limit;
• allow credit unions more flexibility to dispose of re-
  possessed collateral; and
• extend repayment periods for secured and unsecured loans.

Commenting on the proposals the Minister said:

“We have one of the most competitive and sophisticated financial services sectors in the world – but some people are still missing out. And for those people financial services mean cheque-cashing shops and illegal loan sharks.

“Credit unions have been doing invaluable work by providing savings facilities, low cost credit, and financial education to the less well off, giving them the chance to build up a good credit record.

“The Government is determined to encourage the sector and these proposals aim to build on the vital work that credit unions do, particularly in poorer communities.”

Most of the proposed changes could be made through a Deregulation Order under the Deregulation and Contracting Out Act 1994.

The Minister also published proposals for the future regulation of the credit union sector. The Government has asked for comments on two options:

• transfer to the Financial Services Authority the existing functions of the Chief Registrar; or
• bring credit unions within the scope of the FSA’s full regulatory and supervisory powers. This would involve repealing some of the provisions of the 1979 Act, leaving the FSA free to lay down new, or amended, requirements under its rule-making powers.

Commenting on the proposals the Minister said:

“We have to find the right balance for credit union regulation – allowing the sector to develop while ensuring there is adequate protection for savers.

“We will also be looking to the FSA to come forward with a fee structure that meets credit unions’ needs.”

The consultation period ends on 12 February 1999.