Credit unions could soon be offering those struggling to keep their finances afloat a helping hand. The Treasury unveiled plans yesterday to reform tight credit union rules, making them more accessible to those who need it most.
The moves were announced yesterday by the Treasury's economic secretary, Kitty Ussher MP, at the launch of a new All Party Parliamentary Group on Credit Unions. The Group's aim is to have credit unions brought into the twenty-first century as of 2009.
Credit unions, which are run by a community for the community, could potentially offer those in need small, affordable loans
, as opposed to the expensive doorstep and payday loans
that they are currently being forced to turn to.
However, as credit unions stand today, the rules and regulations that apply mean that they are not as effective as they could be with some reformations that would allow them to become more competitive. Proposed changes that could alleviate financial pressure for those on a low income include liberalising membership criteria and broadening the 'common bond' meaning more people would be eligible to become members of a credit union.
Kitty Ussher announced the Government's proposal of new measures that could allow groups to become members of a credit union instead of them being exclusive to individuals, as they are today. Speaking of the projected changes, she said: "We want to make it easier for families to access the affordable credit on their doorstep that is offered by credit unions, rather than having to turn to more expensive schemes, or at the extreme end, illegal loan sharks.
"We want to give all mutuals the chance to flourish – to liberate them to compete more fairly and freely with companies, so that common ownership becomes a genuine alternative to the company form, and for the sector to continue to make a difference to even more people across Britain."
Commenting on the Government's proposals, Tim Moss, head of loans at moneysupermarket.com, said: "Cheap debt is a thing of the past, with many Brits finding it increasingly difficult to be accepted for any form of credit. Therefore, the Government's suggestion that it may make it easier for families to access credit via credit unions from next year is a step in the right direction.
"Reasonably priced credit such as that offered by credit unions could be a sensible way to prevent low income families defaulting on their household bills." But, he warned of their past adding: "Credit unions have a history of financial instability, with the FSCS regularly having to step in when they have failed. Credit unions will therefore need to demonstrate their own financial security."
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