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He said: “This could be an exceptionally good thing for customers. There needs to be more competition to banks and credit unions can now provide this.
“They offer services banks don’t get involved in and will give people a greater degree of choice in the marketplace.”
His comments came after amendments to the Credit Unions Act, which became law on Sunday 8 January, meant these institutions are now free to provide services to new groups of customers and offer different types of products and partnerships.
Mark Lyonette, chief executive of the Association of British Credit Unions, said: “Credit unions will be able to reach many more people, helping them to develop a savings habit, which can only be good for communities.”
Previous restrictions meant those eligible to join a credit union had to be individuals with something in common. Now, credit unions can extend their reach to organisations such as housing providers, community groups, businesses, partnerships and charities.
They can also offer membership to employees of a national company or tenants of a housing association, even if they live outside a geographical area that the credit union services.
Restrictions have also been removed so credit unions can pay interest instead of dividends on savings, making it easier for people to compare the rates of return from credit unions with other high street savings providers.
The news came as the Financial Services Compensation Scheme announced the bailout of Handsworth Breakthrough Credit Union, which went into default on 5 January 2011. It has 365 members with accounts totalling some £206,000.