The Government have previously announced that we will work with credit unions on ways in which the future progress of this sector can best be supported.
The high-level objectives are to enable credit unions joining the project to: increase access to financial services to at least 500,000 more people on low incomes by March 2015 and a total of at least 1 million more people by March 2019; and to reduce their costs and become financially sustainable by March 2015, thus eliminating the need for further Government funding of credit unions after that date. The project will provide access to affordable credit, bank and savings accounts, and save consumers up to £1 billion in loan interest repayments by March 2019.
The feasibility study also showed that at present even the biggest credit unions struggle to meet the operating costs of making small loans to people on lower incomes. Therefore, in addition to our investment in modernisation and expansion, HM Treasury has consulted on raising the cap on the interest rate that credit unions are permitted to charge on loans from 2% to 3% per month, supporting credit unions to achieve financial sustainability and reach a wider range of customers. The consultation period is now complete and HM Treasury is considering the responses received and plan to provide a Government response this summer with any changes on the rate cap coming into effect from April 2014.