Credit unions will receive new powers to deliver more services to more members and communities on 8 January.
The new powers are the result of legal changes which give credit unions more flexibility to choose who can access their services. Credit unions will now be able to extend membership to more than one group of people, no matter where they live or work.
For the first time, credit unions will be able to pay interest on deposits, instead of a dividend, and businesses and community organisations will be able to join a credit union and use the services it provides.
The changes are aimed to help individuals, businesses and other organisations access fair and affordable financial services in their communities and allow credit unions to provide a more effective alternative to high street banks on the one hand and high cost lenders and loan sharks on the other.
Until now, credit unions have been hampered by outdated restrictions which meant all of their members had to have something in common – such as living in the same geographical area or working for the same employer – only individuals were able to become members, not organisations themselves, and credit unions could not pay interest on savings, only a retrospective dividend.
Credit unions no longer need to prove that all the eligible members have something in common, which will mean that credit union services can be extended to new groups much more easily. For instance, a credit union providing services to anyone living or working in Hull will now be able to serve all the employees of a company too, even if they do not live or work in Hull.
Credit unions will be able to begin to pay interest on savings, which will mean that people will be able to more easily compare the rates of return with other savings providers and it will help credit unions attract more savers.
The new rules also mean that organisations themselves can join a credit union (up to a maximum of 10% of the members) and use the financial services it provides. A community group, housing association or local employer, for example, may now be able to use a credit union to manage its money, with the added advantage that the money is kept in the community.
As financial co-operatives, owned and controlled by their members, credit unions have no outside shareholders to pay and any profit they make stays in the community and is used to develop the credit union and provide a return to savers.
Mark Lyonette, chief executive of the Association of British Credit Unions (ABCUL), said: “These changes are a major breakthrough in the delivery of credit union services to communities around Britain.