RegulationMay 16 2013

FSCS steps in as sixth credit union collapses in 2013

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ByDonia O’Loughlin

The Financial Services Compensation Scheme is stepping in to protect members of Cumbria-based Millom & District Credit Union, marking the sixth failure in the sector so far in 2013.

Some 530 people have about £235,000 with Millom & District Credit Union. People with less than a thousand pounds will receive a letter to get cash over the counter at their Post Office. Anyone with more than this will receive a cheque.

This follows the Financial Conduct Authority removing Millom & District’s deposit-taking permission in January after the credit union failed to provide audited financial information and returns concerning member numbers.

This is the sixth credit union to collapse in as many months. South Warwickshire Credit Union was declared insolvent at the end of April. The union’s 1,200 members held a combined £214,000 in deposits.

On 29 April Portadown Diamond Credit Union became the first Northern Irish credit union to fail since the region came under the FSCS remit. Portadown was the biggest failure so far with 1,600 members with a combined £1.8m in deposits.

In addition, Marches Credit Union collapsed on 24 April with 350 members and £160,000 worth of deposits; Severn Four Credit Union was declared insolvent in March with 1,500 members and £460,000 in deposits; and Cornwall and Isles of Scilly Credit Union collapsed in February with 2,100 members and £569,000 in deposits.

Altogether the FSCS will be paying out up to £3.45m for these six failures.

The failures continue in spite of government plans to inject £38m into the credit union industry to help it “modernise and grow”.