HISTORIC PRESS RELEASE : Enhanced role for credit unions [November 1999]
The press release issued by HM Treasury on 16 November 1999.
Moves to boost credit unions, announced by Economic Secretary Melanie Johnson today, will provide a new central services organisation and changes to the regulation of credit unions to help them to deliver a more consistent and flexible service to members.
The announcement accepts recommendations in two reports published today, by the Credit Unions Taskforce, under the chairmanship of Fred Goodwin, and by the Policy Action Team looking at ways to improve individual access to financial services. These found that credit unions can provide safe, low cost loans, which are of particular help to those in disadvantaged communities who have problems gaining access to mainstream credit sources.
Welcoming these changes Miss Johnson said:
“As Fred Goodwin’s report on credit unions shows, the way in which they have previously operated has delivered benefits to members, but now needs to be updated to face today’s challenges.
“Taken together, these measures should ensure an enhanced role for the future. Members should benefit from the improved and cheaper services which the central services organisation can provide, from the greater freedoms proposed, and from greater protection for their savings.
“These changes follow widespread consultation with the movement and will, together with other initiatives also announced today, help them to play a part in tackling the problems of financial exclusion. The establishment of a central services organisation will, by spreading best practice and drawing on the expertise and resources of banks and building societies, help credit unions to improve the delivery of their services.”
“The Government expects banks and building societies to play their full part, but in the end it is for the credit union movement – the hundreds of hard working and dedicated volunteers throughout the country – to take advantage of these opportunities.”
Commenting on the Taskforce report, Fred Goodwin said:
“Credit unions have proved their worth around the world as financial institutions for those of modest means. The time is right for them to make a substantial contribution to reducing financial exclusion. There is much that banks and building societies can do to help them achieve this goal, and I am confident that they will rise to this challenge.”
The measures to improve the regulatory framework within which credit unions operate are:
- increases in the maximum repayment periods for loans
- greater flexibility in the common bond requirements
- aligning the maximum amount that can be held in youth accounts with that for adults
- removal of the maximum membership limit
- allowing credit unions to charge for ancillary services
- greater flexibility on disposing of re-possessed collateral
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further consultation on increasing the sources from which credit unions can obtain credit, and greater flexibility on dividend accounts an improved regulatory framework.
Announcing the new regulatory regime, Miss Johnson added:
“We have decided to give the Financial Services Authority the power to make rules for the regulation of credit unions, which will mean in future credit union members will have protection similar to that for bank and building society customers, including membership of a share protection scheme.
“The FSA has assured the Government that it will supervise credit unions in a way which takes account of the needs of small, voluntary organisations, including their ability to pay fees.
“The FSA will discuss with other financial institutions the problems which credit unions would face in meeting the costs of regulation, including compensation and Ombudsman schemes. The Government hopes that the financial industry will respond positively and constructively to these discussions. The FSA will also establish a taskforce which will work closely with the sector to ensure a smooth transition.”
