Credit Unions

Nia Griffith (Llanelli) (Lab)
10. What recent steps his Department has taken to support the work of credit unions; and what plans he has for further assistance.

The Parliamentary Under-Secretary of State for Work and Pensions (Mr. James Plaskitt)
Further to the answer that I gave to my hon. Friend the Member for North Ayrshire and Arran (Ms Clark), we are awaiting the outcome of deliberations on how the £130 million financial inclusion fund, announced in the recent Budget, will be utilised. Given appropriate funding, our intention is to support growth in the third financial sector, to encourage high-performing credit unions to extend their reach, to offer banking services, to promote safe saving and to offer basic insurance products.

Nia Griffith
Will the Minister have urgent talks with Treasury colleagues about why they have been encouraging credit unions to offer easy credit rather than follow the well-tried policy of insisting that customers prove their ability to save? My local credit union in Llanelli, which provides an excellent service, is concerned that easy credit could lead to unserviceable debts and put the security of the credit union itself at risk.

Mr. Plaskitt
Under the rules that apply to investments in respect of the growth fund, it is clear that credit unions should do a full assessment of individuals applying for credit. It is certainly not the case that credit should be extended to individuals who cannot meet the repayments. The important advantage that the growth fund investment gives is that its loans are running rates that are probably at least half those for loans secured from doorstep lenders and vastly less than rates secured from loan sharks. Provided that credit unions carry out the necessary checks on individual applicants, the loans should be affordable.