FSCS in £206k credit union bail-out
The Financial Services Compensation Scheme has confirmed that it will pay out £206,000 in compensation to members of the Handsworth Breakthrough Credit Union after it was declared in default yesterday (5 January).
In an announcement published on the FSCS website, the scheme said members can expect to receive compensation within the next seven days, though more “complex cases” could take up to 20 days.
Declaring the credit union in default means the FSCS is satisfied it is unable, or likely to be unable, to pay back its members’ deposits.
The FSCS said that that credit union comprises of 365 members with accounts totalling £206,000. Members are entitled to compensation of up to £85,000 each, and will not need to complete an application form to make a claim.
The news follows the announcement in November 2011 of new rules designed to boost credit unions by opening up their membership, which are set to come into force this month.
The move to boost credit unions comes following six insolvencies in the sector in 2011. The latest default occurred in September when Gallowhill Credit Union was declared insolvent, with the FSCS paying out a little more than £113,300 in compensation.
According to the Financial Services Authority, which announced that it would be looking into the sector in July last year, approximately six credit unions are declared in default each year.