Credit unions to offer extra services

New scheme will allow increased public funds to support credit unions in Scotland

News, 13 February 2006

A new funding scheme for credit unions, launched today, will allow them to offer home insurance and bill paying accounts to their members, among other services.

Deputy Communities Minister Johann Lamont said the European Commission's approval of a Scottish Executive scheme to allow increased public funds to support credit unions in Scotland would enable them to offer more, new, diverse products and services tailored to the needs of their members.

Under the Scottish Credit Union Service of General Economic Interest (SGEI) Approval scheme, credit unions will be able to offer:

insurance products, such as home, buildings or life cover
budgeting accounts, to pay bills automatically/directly
savings accounts, with competitive rates of interest
flexible, low cost loans which are not linked to the level of savings and are based on the ability to repay.

Commission support

The scheme replaces the current support scheme, the Credit Union Capacity Fund. Over 30 credit unions have benefited from this scheme, which comes to an end next month. Last year the Executive secured a European Commission decision that public bodies in Scotland could choose to fund credit unions to provide certain basic financial services to their members under an approved state aid scheme.

To support the new services, the Executive is providing £400,000 per year to credit unions developing and offering one of the four products through a Service of General Economic Interest Fund (SGEI). Credit unions will need to be approved by the Executive to offer these products.

A further £100,000 per year Credit Union Assistance Fund is also being provided to cover expenses incurred for IT upgrades, additional staff costs and marketing materials. Both funds begin in April 2006 and are due to end in March 2008.

Figures released by the Executive last week show that the number of adults using credit unions has quadrupled.

Ms Lamont said: "We already know that more and more people in Scotland use [credit unions] to save and borrow. We can now build on that, giving people a choice of suitable and affordable financial products."