Changes to the legislation surrounding credit unions will open up membership to employers and geographically-dispersed workers for the first time, enabling them to compete more effectively with banks.
The news came to light as a survey published by a housing charity, Shelter, revealed that nearly one million Britons had taken out an emergency ‘payday’ loan to help pay their rent or mortgage over the last year. Short-term payday loans, which charge interest rates of up to 4,000%, can be taken out online or on the high street and are subject to minimal credit checks.
But new powers given to credit unions in England, Scotland and Wales mean that from Sunday 8 January, a company’s entire workforce will for the first time be able to set up or join a single scheme, no matter where they live or work. In the past, all members had to have something in common such as living in the same geographical area or being located in the same workplace.
Moreover, while formerly only individuals were allowed to join, membership has now been extended to companies, which means that employers can now deposit money into the savings scheme too. Corporate membership is permitted to comprise up to 10% of the total of any individual credit union.
The legal changes will likewise enable social clubs and other staff groups to keep their money in a credit union as well if they so choose.
Mark Lyonette, chief executive of trade association, the Association of British Credit Unions Ltd, said: “The new rules mean credit unions can now compete more effectively with banks and other lenders to provide fair and affordable financial services to employers and their employees. The changes will help credit unions build stronger relationships with employers and encourage employees to develop a savings habit – which can only be good for workplaces and communities.”
Credit unions are financial co-operatives that are owned and controlled by their members. There are no external shareholders and any profit is retained within the group to provide savers with a return. Payment can be made via payroll deductions and the aim is to provide members with an affordable source of credit.
