INDUSTRIAL AND PROVIDENT SOCIETIES (CREDIT UNIONS) (Hansard, 17 May 1972)

§ Mr. John Roper (Farnworth)

I beg to move, That leave be given to bring in a Bill to make provision for the registration, incorporation and administration of credit unions by applying with modifications and amendments the provisions of the Industrial and Provident Societies Acts 1965 to 1968 to them. There is, unfortunately, at the moment a great deal of ignorance in this country about the nature and function of credit unions. This is a great pity, for although the commercial provision of credit in this country is well developed there are certain gaps which could be filled by the development of credit unions and there is a certain amount of exploitation of the consumer which could be reduced by the effective operation of credit unions.

Credit unions are mutual savings and loan societies, in a sense providing services comparable to those of building societies though for other forms of consumer expenditure. They are able to make loans to their members at relatively low rates of interest—for example, in the United States, where they are most developed—because they have a very low percentage of bad debts. This is because their members, averaging in the United States about 1,000 per credit union, are members of a credit union because of their common bond with the other members of that credit union. The common bond may be that they work in the same firm, belong to the same church, belong to the same trade union, live in the same district, or have some other form of common association which means that they will be well known to one another.

The mutual principle of credit unions has been particularly well developed in the United States where 22 million adults are members of credit unions having assets of some £7,000 million. There is a credit union operating in the White House for the benefit of the White House staff. These mutual non-profit-making credit co-operatives in the North American countries, both Canada and the United States, provide some 12 per cent. of consumer finance. In other Commonwealth countries, including Australian and Caribbean countries, credit unions are well developed, and in recent years there have been important developments 530 in the countries of Africa, Asia and Latin America.

In this country, although there has been some development, particularly among the immigrant community coming from the Caribbean, the credit union movement does not yet play a significant role in the provision of consumer finance. The credit unions which have been set up, and there are now some 40 of them, are hampered by the state of the law on consumer finance in general and on credit unions in particular.

This point was noted last year in the report of the Crowther Committee on Consumer Credit, which examined, in passing, the legal problems of credit unions in Great Britain. While referring to the more satisfactory legal framework existing in Northern Ireland, the report suggested that the law governing credit unions should be rationalised, and concluded that there is a prima facie case for encouraging the credit union movement and for taking steps to make its existence, its aims and its methods widely known in the hope that it may take root here and more credit unions be formed in Britain. The object of my Bill is to provide, within the general framework of the body of legislation dealing with mutual and cooperative forms of economic organisation, a structure for the further development of credit unions. It would draw upon the successfully operating Northern Ireland legislation in this field and would remove some of the legal difficulties at present affecting the operation of credit unions in Great Britain. Credit unions would then have a better chance to grow, and, while it is unlikely that they would quickly attain in this country the importance which they enjoy in North America, they could provide a useful addition to the facilities for consumer credit available in Britain. They would provide in most cases less expensive credit, and because of the mutual nature of the societies they would also be able to educate their members in the wise use of money and the management of their financial affairs.

The Government in due course may be bringing in general legislation covering the proposals in the Crowther Committee's Report on Consumer Credit. In the meantime I hope that the House will permit my Bill to start its passage in an attempt to encourage these mutual deposit and small loan societies to develop.