New image call for credit unions
19 May 09
Credit unions should no longer be seen as "a poor man's bank", according to a committee of MPs. The Scottish Affairs Select Committee has called for more support for credit unions to attract money from affluent savers
In a report, the MPs noted credit unions are important as a source of finance, given the crisis in banking.
The MPs also urged the UK Government to introduce a legal cap on interest rates charged by other lenders.
Credit unions face a 26.8 per cent interest rate cap on loans, but other lenders were found charging as much as 254 per cent.
The report into credit unions challenged the Scottish Government to reverse its cut in ring-fenced financial support.
It highlighted a change in Scottish Government funding that cut £2.7m of credit union funding introduced by the previous Holyrood administration to improve and expand services to the public.
Under the present Scottish Government, that money became part of two funds, together worth £42m, aimed at a much wider range of activities.
A new fund specifically for credit unions was set up earlier this year and allocated £250,000 over three years to help unions "grow and weather the global economic downturn".
A spokesman for the Scottish Government said the changed arrangement amounted to a 37 per cent increase in funding for the third, or voluntary sector.
There are 500 credit unions in Great Britain, with assets of over £500m. Of these, 115 are in Scotland and 40 per cent of British Credit Union membership is north of the border, heavily concentrated in west central Scotland.