Over recent months more and more people have taken an interest in local credit unions, and this is partly because of the tighter credit conditions that have come into play since the onset of the global credit crunch, making it difficult or even impossible for many consumers to get finance through a mainstream lender. In fact, there have been reports that more people have been turning to more questionable lines of credit such as doorstep lenders and loan sharks, and consumers such as these have been urged by some industry officials to look into the possibility of joining a credit union and getting affordable finance through that route.

A credit union is a member run financial co-operative, and normally those that are members of the credit union have some type of common bond, such as living within a certain post code area, working for a certain employee, or some other common bond that makes them eligible. However, a recent report has indicated that the rules and regulations governing credit unions could actually be relaxed by the government in the near future, and this is to provide greater facilities to those on low incomes who are struggling financially.

The changes involve looking into broadening the scope for organisations to become credit unions, and this in turn could mean greater availability of financial products at affordable, low rates for those on low incomes.

The Economic Secretary and City Minister, Kitty Ussher, last year suggested that an overhaul was required when it came to this matter. She said: ‘The excellent services provided by co-operatives and credit unions take place within an outdated legislative framework and overhauling this will be key to achieving a significant expansion of the sector.’

She added: ‘I want the sector to thrive and grow further, to be widely seen as a genuine alternative to proprietary companies across the country, not stereotyped as ‘old fashioned’ or confined to its northern roots. This is a vision of credit unions as the modern day equivalent of 18th century ‘town banks’, providing a local, trusted, alternative to the national banks on every high street. To achieve this vision means removing barriers to co-operatives competing fairly in the marketplace, and enabling them to bring a greater range of services to a wider range of people.’

A number of industry officials have said in the past that credit unions could be the right solution for low income consumers who are struggling to get finance, and have been trying to educate consumers into the benefits of looking into a credit union loan in times of need rather than turning to expensive payday loans or crippling doorstep loans.

One official said: ‘Borrowers should always check out the loans available at their local credit union. ‘Many people think credit unions are just for savers. But they offer affordable loans with low and transparent interest rates. Most charge no more than 1% per month in interest. They are a safe and accessible option for many.’

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