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Treasury Select Committee – Banking Inquiry

Executive Summary

  • Credit unions are financial co-operatives owned and controlled by their members on a ‘one-member-one-vote’ basis. They offer safe savings products and affordable loans and an increasing range of other services.
  • Credit unions are legally constituted under the Credit Unions Act 1979. They are regulated deposit takers with the same protections and safeguards as banks and building societies.
  • Credit unions provide inclusive services to all their communities, rather than simply the better-off.
  • Over the past decade savings, loans and assets held by credit unions have grown four-fold and membership has tripled.
  • Impending reforms of the Credit Unions Act, which has been described by the World Council of Credit Unions (WOCCU) as one of the most restrictive in the world, will see credit unions reaching out to new groups and developing new services.
  • At present, the Legislative Reform Order (LRO), which will bring in these vital reforms, is still making its way through Parliament. We are keen for this process to be completed as quickly as possible, so that credit unions and consumers can start to benefit from the reforms.
  • The Coalition: our programme for government gives a commitment to diversity in financial services, the promotion of mutuals and a more competitive banking industry. We believe the continued development of credit unions is vital to this process as they are the only true, local alternative to mainstream banking.
  • The international model of credit union development rests on centralised services supporting a local credit union.
  • With a back-office system in place, all credit union services could be available through the Post Office network. This would make credit unions more accessible and boost Post Office revenue and sustainability.
  • The development of the back-office system and Post Office partnership would cost around £10-£15 million. Given its potential to address several key areas of government policy, this represents significant value for money. The system would increase diversity and competition in banking and improve both the sustainability of the Post Office network and financial services provision.

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