The Government is proposing a Legislative Reform Order to enable co-operatives and credit unions to grow in economic terms, and to help increase their efficiency and ability to compete.
Changes proposed include "radically" changing the “common bond” that restricts membership of credit unions to people who live in certain areas or work for a particular company. It will also be possible for groups, instead of individuals, to become members.
Credit unions will also be allowed to pay interest on members’ deposits and be able to charge the current market rate for service including chequebooks or money transfers.
Kitty Ussher, Economic Secretary to the Treasury, said: “Now more than ever, given families are feeling the pinch due to the tough situation in the international economy. 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.”
The Treasury will consult soon on the proposed reform, with a view to introduction in 2009. Work will continue on preparing for primary legislation, so that further reforms can be introduced when an opportunity arises.
In response to the announcement, Mark Lyonette, Chief Executive of ABCUL (Association of British Credit Unions) said: “We’re delighted that Kitty Ussher has announced that legislation will be brought forward to modernise the way credit unions can operate. In particular we will be welcoming a relaxation of the common bond. This will mean that credit unions can offer their services to more people.
“Our aim is for credit unions to offer millions of people in the UK a fair, responsible and safe alternative – a trusted way to make the most of their money.”