FSCS warns over latest credit union failure
The Financial Services Compensation Scheme (FSCS) has warned that compensation may be required for another credit union that has gone into liquidation, the fifth such failure so far in 2011.
In a statement the scheme said that it had been notified by the Financial Services Authority (FSA), which regulates credit unions alongside other mutual societies, that Birmingham-based Lee Bank & Highgate Credit Union was being closed.
The FSCS added that it was, along with the FSA, seeking to establish whether the credit union is able to return members' savers.
The statement continued: "If the credit union can't pay back the money it owes its members, we will declare it ‘in default’ and will aim to pay compensation to eligible members in the majority of cases within seven days.
"We will aim to pay any remaining compensation claims (i.e. those that are likely to be more complex) within twenty working days. Members of the credit union will not need to apply for compensation – we expect to send their compensation to them automatically."
The FSCS guarantees savings up to £85,000 for members of a credit union that is declared in default.
This is the fifth credit union to enter insolvency in 2011, following the closure of the Havant Area Savers Credit Union in January, the Southend Credit Union in May, and both the Worcestershire Credit Union and the Caribbean Parents Group Credit Union in June.