Reform credit union capital requirements and reform the Credit Unions Act, APPG Chair says
08 Feb 19
This week, Chair of the All-Party Parliamentary Group (APPG), Bim Afolami MP, has called on Government to support credit union expansion by reviewing capital requirements and reforming the Credit Unions Act in a debate in Westminster Hall. In support of his case he cited data on credit union lending in the most deprived communities in the country.
Addressing Treasury Ministers, Bim said: “One of the main purposes of credit unions is to provide that face-to-face advice. Credit unions are often active in places that banks left long ago. Providing that personal information that helps people to build up their savings is important.
“Credit unions in the 10 most deprived communities in Britain are lending heavily, and they consider loans that few other lenders would consider because of the applicants’ credit scores, while also charging considerably less than any other type of financial service. Credit unions in the UK currently have £860 million out on loan, and that lending is predominantly focused on those at the bottom end of the income scale.
“Evidence shows that once people in deprived communities are given a chance to access credit on affordable terms, they start to see patterns of improvement in their credit profiles. Over time, those people will no longer necessarily need specialist financial advice from credit unions, because they will be able to bank with and access the mainstream financial services sector.
“Will the Minister agree to work with me on two aspects of credit unions? First, will he consider amending secondary legislation to broaden credit union lending powers, so that they are able to service more people from that vulnerable group? Secondly, will he work with the Bank of England to review capital requirements for credit unions, so that the sector can serve more people more effectively?
Anneliese Dodds, Shadow Minister (Treasury) added “ I was very pleased to hear the comments of the hon. Member for Hitchin and Harpenden about credit unions in that regard. Yet again, I urge the Government to focus on better integrating credit unions into the Help to Save programme”.
Acknowledging the value of the British credit union sector, Robert Jenrick, the Exchequer Secretary to the Treasury, said: “The number of individuals who are members of credit unions is rising—it is now over 2 million. There has been some consolidation in the number of credit unions, but the number of members benefiting from them is increasing. I think that they now have assets of £3.3 billion. We are making a number of interventions in that respect, including a FinTech challenge fund to see how FinTech can help with some of the social problems that we have discussed in terms of access to capital.
“I am happy to write to my hon. Friend the Member for Hitchin and Harpenden and any other hon. Members who are interested about the measures that we have taken and are interested in taking to ensure that credit unions become more widely available, including, of course, by increasing their scope from 2 million to 3 million members and their geographical reach, which helps them to have a larger presence in big cities and different regions of the country”.
To read the full debate from this week, please click here.