Credit unions poised to compete with payday advance firms

Thanks to new powers granted to them by the Government, credit unions in the UK will soon begin to compete with payday advance firms for customers through a significant expansion of the services they are permitted to offer to people living in Wales, Scotland, and England.

Thanks to these newly granted powers, credit unions will begin moving into the territory traditionally held by more traditional lenders, by being able to begin paying interest on deposits instead of just dividends and extend membership to multiple groups of people regardless of where they reside or work. Credit unions are now also able to offer their services not just to individuals, but to community organisations and businesses as well.

These new changes were instituted in an effort to provide people and organisations in local communities better access to affordable and fair financial services, proponents of the new changes remarked.  The expanded powers will also free up credit unions to compete more effectively with both High Street and instant cash loan providers by establishing a middle ground of sorts, which many hope will provide people with cash loans at lower interest rates.

Credit unions have not been able to offer these services due to restrictions placed upon them limiting their membership to certain commonalities, such as working for the same employer or living in the same geographical locale.  However, these providers are no longer bound by these restrictions, which will lead to their services being extended to new groups of individuals and businesses with much more ease.

Another major change to the rules that credit unions had to abide by include paying only a retrospective dividend on savings instead of earned interest.  However, now credit unions will be able to provide interest on savings deposits, meaning that members will have more options when it comes to financial service providers of savings accounts, while credit unions will also be able to boost the number of customers they have that are interested in a full-fledged savings account.

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