The Treasury is proposing to widen access to credit unions by letting some existing members who have moved away introduce relatives or members of their household for membership.
Ministers intend to bring forward an amendment to the Financial Services and Markets Bill during its committee stage. The measure is a proposal, not a change already in force, and its final wording and timing remain to be settled.
The Treasury estimates that more than 50,000 people across Great Britain who could not introduce a relative or household member under the existing rules would be able to do so under the change. That estimate concerns existing people who could gain the ability to make a referral; it is not a count of new members who have joined, or a prediction that 50,000 relatives will join.
How a move can affect the connection
Credit unions are financial co-operatives owned by their members. They take savings and make loans to members, with the organisation’s services run for their mutual benefit. To join, a person normally needs a qualifying connection, known as a common bond, with the credit union.
That bond can take different forms. A locality-based union can serve people who live or work in a defined area, while another may be connected to an occupation, an employer or an association. A credit union can have more than one type of common bond.
Members may be able to remain in a credit union after their circumstances change. But someone who no longer meets the relevant bond can face a restriction on introducing family members. The proposed amendment is intended to address that problem, including where a member has moved away from a locality-based union’s area.
Economic Secretary to the Treasury Lucy Rigby told MPs that the government intends to introduce an amendment allowing members who do not themselves directly meet the common bond to introduce family or household members on the same basis as other members. The precise rules will depend on the amendment and the legislation that ultimately emerges.
The wider Bill received its second reading in the House of Commons on 10 November. A public bill committee is due to begin examining it on 24 November, with written evidence invited as part of its scrutiny. The government’s stated intention to table an amendment does not mean Parliament has agreed to it.
A wider set of proposed changes
The new proposal sits alongside other planned changes to the common bond. Under the existing rules described in the Bill’s explanatory material, a credit union’s rules can allow a person to join through a member if that person is both a relative and a member of the same household, and the existing member directly meets the bond.
The Bill already proposes broadening that route to include relatives who do not live in the same household and household members who are not relatives. It would also allow some retired members to remain fully qualifying members of employment- or occupation-based unions, and allow eligible retirees to join after leaving work. Another proposed measure would extend locality-based eligibility to students studying in an area.
Those provisions are not an automatic offer of membership to everyone. The explanatory material says credit unions in Great Britain would have the option of adopting the changes in their own rules. The proposals concern Great Britain; credit-union policy is devolved in Northern Ireland.
Separately, the government has announced plans to increase the cap on potential membership for a locality bond from three million to ten million. That figure refers to the size of the potential membership covered by the bond, not the number of people already enrolled. The Bill’s explanatory notes describe the cap change as a separate measure to be delivered through secondary legislation.
What prospective members should check
Wider eligibility would be a route to apply, not a guarantee of a loan or a particular savings return. Products and joining requirements differ between credit unions. Some may require a person to save or be a member for a period before applying for a loan; others may accept an application sooner.
Credit-union borrowing can be cheaper than high-cost short-term lending, but it is not necessarily cheaper than every bank or building society loan. In England, Scotland and Wales, the maximum credit-union loan interest rate is 3 per cent a month, equivalent to 42.6 per cent APR. Borrowers should compare the total cost and consider whether repayments are affordable.
Savings terms also vary. Some unions offer an interest rate, while others pay a dividend that can change with the organisation’s financial performance and may be zero. Members should check how they can pay in and withdraw money before choosing an account.
If an authorised credit union fails, eligible savings are generally protected by the Financial Services Compensation Scheme up to £120,000 per eligible person per authorised firm. The limit applies across accounts sharing an authorisation, rather than separately to every account.
