Affordable finance access for tens of thousands more people
Government announces further reforms to credit unions to allow members who move away from the area to refer their relatives for membership.
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The change could unlock access to rewarding savings accounts and small loans with lower interest rates to tens of thousands more people.
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The reform follows Government action to raise the membership cap on local credit unions from three million to ten million members.
Tens of thousands more families, workers, students and retirees will have access to affordable finance under a new credit union reform announced by the Government.
Under the proposed changes, someone who is a member of a credit union but moves out of the area it is situated will now be able to refer a relative or household member to become a member and access its services, strengthening their financial resilience. Currently, someone must live in the same area as the credit union to do so.
Credit unions offer affordable, community based financial services, including easy access savings accounts and small loans at lower interest rates which are not often available at high street banks.
Someone can only become a member and use their services if they have a so-called “common bond” with the membership – such as living in the same area or sharing the same employer.
Over 50,000 people across Great Britain currently not able to refer a relative or household member would be able to do so because of this change, according to Bank of England data.
Economic Secretary to the Treasury, Lucy Rigby KC MP, said:
Credit unions are at the heart of communities up and down the country, offering a trusted route to access affordable finance, facilitating greater household resilience and promoting financial inclusion. That’s exactly why we’re supporting the sector to grow and reach even more people.
This change is in addition to other reforms to expand access to credit unions and double the size of the sector, including:
- Raising the membership cap on local credit unions from three million to ten million members.
- Enabling students to join their local credit union and access its services.
- Allowing members of employment-based credit unions to continue to be able to refer relatives even after retirement.
The industry has welcomed the additional reform which was announced at the second reading of the Financial Services and Markets Bill in parliament.
Matt Bland, Chief Executive of All Together Money, said:
This is another positive step towards creating a more flexible legislative framework that supports the growth and development of credit unions, enabling them to reach more people and play an even greater role in strengthening financial inclusion across Great Britain.
Sarah Harrison, Chief Executive of the Building Societies Association, said:
We welcome this further reform to credit union common bond rules. Allowing members who move away to continue providing a route into membership for their relatives removes an unnecessary barrier to credit union membership.
Alongside wider reforms to expand access to credit unions, it reflects the way families live today and will help more people benefit from fair, affordable financial services.
Laura Willerton, Head of Commercial Deposits at The Co-operative Bank, said
This is great news for credit unions and the people and communities they serve. Credit unions provide a trusted route to affordable borrowing and savings, and play an important role in supporting financial inclusion.
Making it easier for people to access credit unions will allow more families to benefit and help the sector grow its reach and impact. As a bank with roots in the co-operative movement and a shared commitment to putting people and communities first, we’re pleased to support reforms that strengthen the credit union sector.