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Reforms to provide access to affordable credit

Reforms to provide access to affordable credit

HM TREASURY News Release (66/08) issued by The Government News Network on 30 June 2008

Economic Secretary to the Treasury, Kitty Ussher MP, today confirmed Government plans to make it easier for families to access the affordable credit options offered by credit unions by removing the red tape restricting the growth of the sector.

Kitty Ussher will outline the proposed changes in a speech at the launch of a new All Party Parliamentary Group on Credit Unions.

The Government proposes introducing a Legislative Reform Order to enable cooperatives and credit unions to grow in economic terms, and to help increase their efficiency and ability to compete.

Kitty Ussher 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.

"Cooperatives and credit unions make a significant contribution to our economy, and to our society. Bringing the legislation that governs them into the twenty-first century will remove some of the outdated and unnecessary restrictions that are limiting mutuals from growing and competing."

Changes planned in the Legislative Reform Order include:
Credit Unions
* liberalising membership criteria and radically changing the "common bond", so that credit unions can provide their services to a wider range of people
* making it possible for groups, rather than just individuals, to become members
* allowing credit unions to pay interest on members' deposits.
* removing the statutory limit on non-qualifying members.
* allowing credit unions to charge the market rate for services such as chequebooks and money transfers.
* Removing the £20,000 limit on risk share capital which is transferable, but not withdrawable
Cooperatives and Credit Unions
* Giving societies the flexibility to choose their own accounting year-ends
* Abolishing the requirement to have interim accounts audited.
* Lowering the minimum age for being an officer of a society to 16
* Bringing the fee for a copy of the society's rules up to date
* Making it easier for members to dissolve a society, subject to safeguards.

The Treasury will consult soon on the proposed Legislative Reform Order, 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.

Notes for Editors


1. A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise (International Cooperative Alliance definition)

2. There is a present no law on cooperatives in Great Britain. Many cooperatives are registered under the Industrial & Provident Societies Act 1965 (IPSA 65)

3. Cooperatives may however establish under other legal forms, including as companies (under the Companies Act), partnerships, unregistered unincorporated associations and even as limited liability partnerships. The FSA is the registrar for IPSs registered under the IPSA 65 as cooperatives while Companies House registers those set up as companies.

4. There are over 4,300 cooperatives in the UK, owned by over 11 million people. Together, they create and sustain nearly 200,000 jobs, and contribute £27 billion in turnover, and £8.5 billion in assets to the UK economy. The most significant in terms of numbers are consumer and worker cooperatives, cooperative consortiums, agricultural cooperatives and housing cooperatives.

Credit unions

5. Credit unions are mutually financial organisations run by and for the benefit of their members. Members generally benefit through the provision of savings and loans at improved rates although credit unions are increasingly offering other financial services such as Child Trust Fund accounts.

6. Credit unions incorporate under the Credit Unions Act 1979 and are registered and regulated by the Financial Services Authority.

7. Only individuals can be members of a credit union. Membership is restricted to those that meet a membership qualification that provides a "common bond" based on criteria such as geographical area or workplace.

8. Interest on loans from a credit union cannot exceed 2% per month. Dividends on members' shareholding may not exceed 8% per annum.

9. There are around 600 credit unions in the UK with approximately 500,000 members and assets totaling some £400 million.

10. Kitty Ussher outlined the changes in a speech to the UK Cooperatives conference available and in a speech at the launch of the All Party Parliamentary Group on Credit Unions. Both speeches will be available from:

11. Review of the Great Britain cooperative and credit union legislation: a consultation was published in June 2007. Over 200 responses were received and they were published along with the Government's response in December 2007.

Legislative reform Order

12. Legislative Reform Orders are made under the Legislative and Regulatory Reform Act 2006. They provide a way for Government to modify legislation to remove or reduce burdens on persons arising from legislation, without the need for primary legislation. The Better Regulation Executive has overall responsibility within Government for LROs.

Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to

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