My Lords, the Government are bringing forward legislative reforms to help modernise the way in which credit unions do business and to remove barriers to their development and growth. We have recently announced funding of up to £73 million for the expansion of credit union services. The Government also intend to bring Northern Ireland credit unions under FSA regulation to give their members access to the Financial Services Compensation Scheme and the Financial Ombudsman Service.
I thank the Minister for his response. Does he agree with me that, today of all days, the Government must pledge themselves to urgent action to deal with illegal loan sharks, who in some cases revert to physical and sexual violence against women as they bully and threaten families to pay interest rates of hundreds of thousands of per cent? Will he agree to meet a delegation from the Association of British Credit Unions to discuss a link-up between credit unions and the post office, as a way of providing cheap, affordable credit to all?
My Lords, I am certainly happy to confirm that credit unions play an important part in the Government's priority to see diversity and choice in financial services and to support financial inclusion, given that in areas of the highest economic and social deprivation credit unions are able to achieve the most impact. The credit union movement is growing significantly, with government support and following the support of the previous Government. We will certainly work to do whatever is reasonable to continue with that growth of the credit union movement.
My Lords, does the Minister agree that a key role of credit unions is to provide basic bank accounts for people who are currently unbanked? Could he therefore confirm whether the £73 million that the Government are making available to credit unions will be used in part to set up a shared banking platform for credit unions that would be available in all post offices?
My Lords, I am happy to confirm to my noble friend that Ministers expect the post office network to play a central role in enabling credit unions to reach more families. Part of the funding, which I have already mentioned, is going towards projects related to that end-projects that are in the capable hands of my noble friend Lord Freud. He is running with that project; it is in safe hands and the Post Office is central to it.
My Lords, is the Minister aware of the commission into personal debt that was chaired by the noble Lord, Lord Griffiths of Fforestfach? I declare an interest as member of that commission. Will the Minister consider the proposals and recommendations of the commission, in particular, the proposal to set up a community finance trust that would assist community finance projects such as credit unions?
My Lords, I am happy to look at any suggestions for furthering the development of credit unions and similar savings channels. I am grateful to the right reverend Prelate for drawing my attention to those recommendations.
My Lords, while I welcome most warmly the initiative announced on behalf of the Government, does the Minister agree that a great deal of suffering and injustice could be alleviated and avoided by giving judges in our civil courts the right to strike down claims that arise from loan contracts with unconscionably harsh conditions, particularly extortionate interest rates?
My Lords, it is very much at the forefront of the Government's thinking in this area to make sure that all appropriate steps and options are available so that those at the more deprived end of the economic and social spectrum are not ripped off by loan sharks or whoever. The credit unions that we are talking about have a central role to play in that.
My Lords, when the Government end the social fund maternity grant for the birth of the second child in April, many poorer families will be tempted to turn to loan sharks to borrow money. Will the Government help these families by promoting credit unions as a better way to save and borrow? In asking that question I declare an interest as a member and president of the Islwyn Community Credit Union.
My Lords, that is exactly what we are doing by bringing forward the various reforms that I have described, which will help to modernise and drive forward the credit union movement-a movement that now numbers some 760,000 members in Great Britain. In Northern Ireland, where the movement has a different history, it has some 400,000 members. We wish to see the total in the United Kingdom growing, which is why the measures that we are bringing forward will promote this area of financial activity.
My Lords, is it not the case that the Governor of the Bank of England, Mervyn King, less than a week ago drew attention to the exploitation by the clearing banks of what he called unsuspecting and unsophisticated depositors through their wholly unethical manipulation of interest rates? Should the strictures that the noble Minister has placed on loan sharks not be somewhat directed at the clearing banks as well?
My Lords, we are talking about credit unions this afternoon. I have explained what an important and growing role they have to play in the diversity and choice of our financial services sector in the UK. That is what we should work to promote.