New rules allow credit unions to expand

New rules allow credit unions to expand

Credit unions which have previously had to restrict their services to a common group of members, such as residents of certain geographical area, will be able to expand under new legislation.

While they were only allowed to offer services to individuals, changes to the Credit Unions Act means that they are now allowed to provide services to businesses and community organisations.

They can also pay interest on deposits, instead of a dividend, which will make it much easier for consumers to compare their savings products with other providers’ products.

The changes will allow Credit Unions to expand and compete with high street banks and other savings providers, increasing competition on the high street.

The 450 credit unions in Britain are owned and controlled by their members and are run by volunteers.

They have no shareholders and any profits are used to develop the credit union and provide a return to savers.

This model means that they are well-placed to provide fair and affordable financial services with the advantage that money invested remains within the local economy.

Credit Unions are covered up to £85,000 by the Financial Services Compensation Scheme.

Mark Lyonette, chief executive of the Association of British Credit Unions (Abcul), said: ‘These changes are a major breakthrough in the delivery of credit union services to communities around Britain.

“The new rules mean credit unions can now compete more effectively with banks and other lenders to provide fair and affordable financial services.”

There are 40,258 credit unions in 79 countries worldwide.

Together, they offer affordable financial services to 118 million members.

The latest Credit Union to open its doors in the UK is the First Choice Credit Union which opens on 13 January at the Ribble Valley Citizens Advice Bureau in Clitheroe, Lancashire.

Tags: Association of British Credit Unions, banking competition, credit union, First Choice Credit Union

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