The Association of British Credit Unions (Abcul) has welcomed government proposals to expand the common bond for the sector to drive its growth.
Part of the Starmer government’s plans to double the co-op and mutual economy, the credit union reforms will expand the cap on the common bond from three million to ten million people and allow new categories of people to be included, such as students in a locality-based bond.
Abcul says the reforms “will let credit unions reach millions more people, expanding access to low-cost borrowing and secure savings for households”.
It added: “More people will benefit from affordable loans and savings as the government changes the rules so more people can join credit unions, helping households with the cost of living.
“By making it easier for credit unions to serve more people in their communities, the changes will support families, workers, students and retirees to access fairer financial products and build financial resilience.
“Enabling credit unions to expand and broaden their membership will help ensure that more people can access fair, lower-cost alternatives to high-cost credit. This will strengthen the provision of responsible financial services and support households with the cost of living.”
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Economic secretary to the Treasury, Lucy Rigby, said: “These reforms will help more people get access to affordable credit and a safe place to save, so families have a real alternative to high-cost credit.
“We’re delivering on our manifesto pledge to grow the mutual sector by backing credit unions to expand and serve more communities. It’s another step in making financial services more accessible and supporting people to build financial resilience.”
By raising the cap on locality-based credit unions to 10 million potential members, the changes will make it easier for credit unions to grow and merge, says Abcul.
Students will be able to join locality-based credit unions, alongside people who live or work in the area. And credit unions will be able to serve more relatives and household members, and members will be able to stay with (or join) their credit union after retirement as full members.
The reforms follow the call for evidence on credit unions’ common bond rules launched after chancellor Rachel Reeves’ first Mansion House speech.
They also builds on government efforts to improve financial inclusion and resilience across the UK. As part of its Financial Inclusion Strategy, the government is says it is working closely with the financial services sector and consumer groups to bring forward interventions to make it easier for people to access a bank account, help people to build savings and improve financial education.
“This announcement marks an important milestone in the government’s recognition of the vital role credit unions play in strengthening financial resilience and improving financial inclusion across Great Britain,” said Abcul CEO Matt Bland. “Reforms to the common bond will enable credit unions to expand their reach, serve more communities and work together more effectively to deliver sustainable growth.
“As the government’s Financial Inclusion Strategy moves into delivery, it is encouraging to see credit unions recognised as a central part of improving access to fair and affordable financial services.”
In a message to Co-operative Party members, Rigby added: “I’m proud that this Labour Government is working hard to double the size of the co-operative and mutual sector. Financial co-operatives like credit unions are an important part of that commitment, and we will keep building on progress like we’ve seen today to ensure co-operatives and mutuals can continue serving their communities and delivering economic growth.”
Sarah Harrison, CEO of the Building Societies Association, said: “This is a practical change that will help credit unions grow and enable more people to access fair, straightforward financial services – both savings products and unsecured loans.
“Credit unions and building societies were founded on the same principles of putting members first and taking a long-term view to support the financial health of the communities they serve. Credit unions now have the opportunity to grow while staying true to that purpose.
“At a time when many household finances are under pressure, access to lower-cost borrowing and a safe place to save can make a real difference, including for those only able to save small amounts at a time.
“We look forward to continuing to work with the government to support the growth of the mutual sector.”
The Call for Evidence summary can read here.
