Credit union body Abcul defends costly levy

Members face bill for Financial Services Compensation Scheme charge

Abcul, the umbrella body for credit unions, has defended a Financial Services Compensation Scheme levy that it says will cost its members £214,000.

Last month Johnstone Credit Union in Scotland suggested that credit unions could face a bill of several million pounds as part of a £406m levy on deposit takers imposed by the FSCS, which provides compensation to savers in the event of banking failures.

The levy came after the FSCS made large payments to compensate savers that held cash in Bradford & Bingley and three Icelandic banks.

Johnstone Credit Union has said it will not pay the invoice from the FSCS. "Our members are paying a high price through the loss of jobs, homes and local services," said Tom Kelly, treasurer of the union. "It is morally indefensible to burden them further by plundering their credit union earnings."

But a spokesman for Abcul said Johnstone Credit Union's calculations were "full of fundamental factual errors" and that Abcul believed credit unions should pay the FSCS levy.

"The present levy is a fraction of the £4m incurred by the FSCS to pay for defaulting credit unions in the past," the spokesman said. "To refuse to pay this levy now, while still wanting the security the FSCS brings to our members' savings, would risk the credibility of the sector."

The payments being sought from credit unions were proportionate with the amount of money held in unions' protected deposits, he said.

But he said that the risks taken by deposit takers should be reflected in the levies they were asked to pay.

Loretta Minghella, chief executive of the FSCS, said: "While we recognise that the levy comes at a difficult time, it is also clear that the FSCS plays a central role in helping promote consumer confidence in financial services, which benefits the whole industry."

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