Credit union rule change to open affordable savings and loans to tens of thousands more people

Tens of thousands more people could get access to affordable savings and low-cost loans from credit unions, under a reform announced by the government on 11 November that loosens the rules on who can join.

At present, someone has to share a "common bond" with a credit union's members, such as living in the same area or working for the same employer, to join and use its services. Under the proposed change, a member who moves out of the area will still be able to refer a relative or someone in their household to become a member.

More than 50,000 people affected

According to Bank of England data quoted by HM Treasury, more than 50,000 people across Great Britain who cannot currently refer a relative or household member would be able to do so after the change.

Credit unions are not-for-profit, member-owned financial co-operatives. They offer easy-access savings accounts and small loans at lower interest rates, which are often not available from high street banks, and are an important alternative to high-cost lenders for people on modest incomes.

Economic Secretary to the Treasury Lucy Rigby KC MP said: "Credit unions are at the heart of communities up and down the country, offering a trusted route to access affordable finance, facilitating greater household resilience and promoting financial inclusion. That's exactly why we're supporting the sector to grow and reach even more people."

Part of a plan to double the sector

The change adds to other reforms intended to expand access to credit unions and double the size of the sector, including:

Raising the membership cap on local credit unions from three million to ten million members.

Allowing students to join their local credit union.

Letting members of employment-based credit unions keep referring relatives after they retire.

The latest reform was announced at the second reading of the Financial Services and Markets Bill in Parliament.

Industry welcome

Matt Bland, chief executive of All Together Money, called it "another positive step towards creating a more flexible legislative framework that supports the growth and development of credit unions".

Sarah Harrison, chief executive of the Building Societies Association, said: "Allowing members who move away to continue providing a route into membership for their relatives removes an unnecessary barrier to credit union membership."

Laura Willerton, head of commercial deposits at The Co-operative Bank, said: "This is great news for credit unions and the people and communities they serve."

What it means for Birmingham households

With the cost of living still squeezing many families, a fair place to save and borrow can make a real difference, especially for people who might otherwise turn to expensive credit. Birmingham has its own credit unions serving people who live or work in the city. Anyone thinking of joining can find their nearest one through the Association of British Credit Unions, and check whether they qualify through where they live or work.