Government changes law to allow charities to join credit unions 3

Finance | Vibeka Mair | 4 Jan 2012

Charities, social enterprises and community groups will be able to join a credit union from next week under changes made to the Credit Unions Act 1979.

Previously, only individuals were able to be members of credit unions and use the financial services they provide. However, last November, a Legislative Reform Order was passed by Parliament, under the Credit Unions Act 1979, meaning that from 8 January credit unions can:

Reach out to more people by extending membership to new groups – as a credit union will no longer have to prove that everyone who can join the credit union has something in common
Provide services to community groups, social enterprises and businesses, not just individuals
Choose to pay interest on savings, instead of a dividend

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

“The new rules mean that, for the first time, credit unions will be able to offer services directly to charities, social enterprises and community groups, allowing credit unions to compete more effectively with banks and other lenders to provide fair and affordable financial services.

"The changes will also help credit unions build stronger relationships with the staff, members and service users of organisations, helping them to develop a savings habit – which can only be good for communities.”

As financial co-operatives, owned and controlled by their members, credit unions have no outside shareholders to pay and any profit they make stays in the community and is used to develop the credit union and provide a return to savers.

Place a comment

John
5 Jan 2012

Credit unions will still be run by a volunteer board with all members having a vote. They will also require to vote on approving these changes into each credit unions constitition and can chose which options to accept. Their interest will still be be limited but allowing small companies and social enterprises to access loans at lower rates to use in their common bond area as already works in countries with more advanced credit union systems.

[Reply]

Lisa
4 Jan 2012

maybe, but what they will now be able to do is so very important for us at this very moment. We need someone to be able to provide a new model for banking so that we can choose not to line the big boys pockets.

I presume that credit unions won't HAVE to change how they are operating if they prefer not to.

I think this is very good news!

[Reply]

Heather Alexander
4 Jan 2012

As a former director of a credit union (some years ago), it seemed to me that the "common bond" was at the heart of the credit union - and something we had to prove existed to the regulator. Will credit unions lose something of their unique position as they become more commercially competitive with the banks?

[Reply]

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