From: FINANCIAL TIMES 17/4/2013
Credit unions win state funding pot
By Elaine Moore
The Association of British Credit Unions Limited is to be given £38m by the coalition government to help turn the sector into a credible alternative to high-interest payday lenders.
The money will be spent on modernising credit unions, enabling them to buy new computer systems and improve their infrastructure so they can offer a wider range of products and work with a greater number of people.
ABCUL hopes to add a million members by 2019.
Credit unions are not-for-profit organisations owned by their members and cannot charge more than 26 per cent interest a year. Just 2 per cent of people in the UK are members of a credit union, compared to more than 70 per cent in Ireland and more than 40 per cent in the US.
Last year, the government relaxed the rules around membership and allowed credit unions to pay interest rather than dividends in an effort to boost interest in the sector.
Lord Freud, minister for welfare reform, said credit unions offered an alternative to vulnerable people and were the antidote to predatory loan sharks or high-interest lenders.
The government announced in November that it would change the finance bill to provide the financial regulator, the Financial Conduct Authority, with the power to cap loan charges.
However, the FCA published a behavioural economics report last week which said that capping interest rates on payday loans could leave some customers worse off.
Some payday lenders charge annual rates of interest of more than 4,000 per cent for unsecured loans.
Credit unions win state funding pot
By Elaine Moore
The Association of British Credit Unions Limited is to be given £38m by the coalition government to help turn the sector into a credible alternative to high-interest payday lenders.
The money will be spent on modernising credit unions, enabling them to buy new computer systems and improve their infrastructure so they can offer a wider range of products and work with a greater number of people.
ABCUL hopes to add a million members by 2019.
Credit unions are not-for-profit organisations owned by their members and cannot charge more than 26 per cent interest a year. Just 2 per cent of people in the UK are members of a credit union, compared to more than 70 per cent in Ireland and more than 40 per cent in the US.
Last year, the government relaxed the rules around membership and allowed credit unions to pay interest rather than dividends in an effort to boost interest in the sector.
Lord Freud, minister for welfare reform, said credit unions offered an alternative to vulnerable people and were the antidote to predatory loan sharks or high-interest lenders.
The government announced in November that it would change the finance bill to provide the financial regulator, the Financial Conduct Authority, with the power to cap loan charges.
However, the FCA published a behavioural economics report last week which said that capping interest rates on payday loans could leave some customers worse off.
Some payday lenders charge annual rates of interest of more than 4,000 per cent for unsecured loans.