Treasury to reform rules for credit unions

Government offers flexible membership, while draft legislation would allow credit unions to pay interest to members

The Government intends to offer credit unions flexible membership and the ability to pay interest to members.

The requirement for members of credit unions to have a close common bond, based either on geographical location, profession or membership of an association, were unduly restrictive, the Treasury said this month.

It said unions based on a geographical area would be allowed to have up to two million members, and unions with other membership criteria would have no maximum limits.

The Government will also publish a draft legislative order that would allow credit unions to pay interest on accounts and pay any dividends they choose to shareholders.

Incorporated and unincorporated bodies would also be given the right to become full members of unions on the same terms as individuals, although limits would remain on the percentage of shares they can own.

Credit unions welcomed the moves. "This reaffirms the Government's commitment to updating credit union legislation, which is badly needed by the sector if we are to fulfil our true potential in Britain," said Mark Lyonette, chief executive of credit union umbrella body the Association of British Credit Unions Limited.

"In particular, we are delighted that the Government has listened to our calls to increase the limit for a common bond. This will enable credit unions to meet the needs of many more people."

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