This item was published during the term of a previous administration that ended in April 2007
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Credit union services extended under new scheme
13/02/2006
Credit unions will be able to offer home insurance and bill paying accounts to their members, under a new scheme launched today.
Deputy Communities Minister Johann Lamont said the European Commission's approval of a new 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 Approval (SGEI) 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
Speaking at Newarthill Credit Union on Monday, Johann Lamont said: "We now have a fantastic opportunity to advance the credit union movement. Run by members and for the benefit of members, credit unions give everyone a fair deal.
"We already know that more and more people in Scotland use them to save and borrow. We can now build on that, giving people a choice of suitable and affordable financial products.
"We all know why it matters. Having home contents insurance brings peace of mind, knowing you're protected if the worst happens. Being able to budget and pay bills - on time - leads to far less stress. Knowing you can borrow at an affordable rate to pay for essential items gives you financial security.
"This new scheme underpins our commitment to financial inclusion, and the role credit unions play in helping people manage their money.
"I can announce today a million pounds of further support to enable these new services to be provided. I'd encourage all credit unions - large or small - to look at their existing products and think about how they can meet the challenge of delivering modern services which serve all their members' needs."
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.
Approved credit unions will be able to offer new products, and seek funding from public funders - Scottish Executive, Communities Scotland, local authorities, Scottish Enterprise, Highlands and Islands - to cover the costs of providing an SGEI product.
In 2005, the Executive secured a decision from the European Commission meaning 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. Under the scheme, credit unions can be approved to carry out financial inclusion activities as a Service of General Economic Interest. Previously, the amount of public funding for any individual credit union was limited to €100,000 over a rolling three year period (approximately £67,000.) i.e. de minimis aid. This had the effect of limiting what credit unions could provide.
Funding under the Credit Union Assistance Fund will be granted as " de minimis" aid.
Figures released by the Executive last week show that the number of adults using credit unions has quadrupled. See http://www.scotland.gov.uk/News/Releases/2006/02/07094300
The Executive's existing support for credit unions, the Credit Union Capacity Fund, ends in March 2006. More than 30 credit unions have already benefited.
The Executive's Financial Inclusion Action Plan can be found at http://www.scotland.gov.uk/News/Releases/2005/01/18103813 With the Action Plan, extra resources of £5 million per year are available to support activity in the eleven local authority areas facing the greatest concentration of financial exclusion