Credit unions set to offer bank accounts

CREDIT unions are set to offer banking services next year in a tie-up with the Co-operative Bank. In what is seen as a major step change in the...

CREDIT unions are set to offer banking services next year in a tie-up with the Co-operative Bank.
In what is seen as a major step change in the development of credit unions in the UK, a selected number, from next autumn, will be able to offer their members a bank account with a debit card which can be used in shops and to withdraw money from cash machines.
Although there will be no chequebooks or overdrafts, account holders will be able to set up standing orders and direct debits.
The accounts will be run and promoted by the individual credit unions but the behind the scenes administration is to be carried out by the Co-operative Bank.
Following the successful completion of this first phase, the service will be rolled out to other credit unions throughout the UK in 2007.
While the full details of these accounts have yet to be finalised, it is envisaged that members applying for a credit union loan will have the money paid into one of these new accounts.
Mark Lyonette, Chief Executive of the Association of British Credit Unions, said: "This shows that credit unions are capable of offering their members modern, accessible financial services. We can offer members a service similar to that offered by banks, but with all the added benefits associated with a financial co-operative that is owned and run by its members.
"Offering credit union members access to banking services in this way represents a major step forward for the Government&#039s aim of eliminating financial exclusion."
David Anderson, Chief Executive of Co-operative Financial Services, added: "Many people may think that the Co-operative Bank is opening up the market to more competition but we see credit unions as part of the wider Co-operative Movement and not as competitors.
"They enable their members to save on a regular basis and provide relatively low value loans that would not be economically available for a high street bank."
• Barclays Bank has also shown its support for credit unions by donating &#163 180,000 to the sector.
The money is to be used to increase the
safety and soundness of credit unions via the use of PEARLS, a financial monitoring system specifically designed for credit unions.
It will give up to 30 credit unions intensive financial monitoring and business planning support through training and mentoring programmes and by taking part in seminars and conferences.
PEARLS has already demonstrated that credit unions can provide affordable loans to many more people, providing an alternative to high interest door-step lenders.
Mr Lyonette said: "I&#039m delighted both with the positive effect that PEARLS has already had on the British credit union movement, and with generous additional funding which Barclays have provided us with.
"Many more credit unions will now be able to benefit from the lessons of PEARLS, and the communities they serve will benefit from the credit union&#039s growth and development."

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