A shake-up of rules on who can join a credit union aim to help more households across Britain access affordable finance.
Credit unions are co-operatives where members pool savings and credit can be offered at a low interest rate.
Members share a common bond, such as living or working in the same area.
They are often seen as an alternative to high-cost lending, with interest rates offered at no more than 3% per month.
The reforms will pave the way for bigger credit unions, with the Government raising a cap on credit unions based in particular areas from three million to 10 million potential members, making it easier for them to grow and merge.
Locality-based credit unions make up 79% of the sector, the Government said.
In addition to people who live or work in the area, students will also be able to join.
Members will also be able to stay with or join their credit union after retirement as full members.
Credit unions will be able to admit members’ relatives even if they do not live in the same household.
The changes are part of wider work to help improve financial inclusion.
The Government said it will legislate to make the reforms as soon as parliamentary time allows.
Economic Secretary to the Treasury Lucy Rigby said: “We’re delivering on our manifesto pledge to grow the mutual sector by backing credit unions to expand and serve more communities.
“It’s another step in making financial services more accessible and supporting people to build financial resilience.”
Lakshman Chandrasekera, chief executive of London Mutual Credit Union, said: “Raising the common bond cap to 10 million gives credit unions the freedom to grow and keep wealth within the communities we serve. In London, we see first hand the demand for fair, affordable finance.”
Frances McCann, chief executive of Scotwest Credit Union, said: “At Scotwest we see every day the difference a credit union can make to households that need an affordable alternative to high-cost credit. These changes will allow more credit unions to reach more of those people.”
Matt Bland, chief executive of Abcul (Association of British Credit Unions), said: “This announcement marks an important milestone in the Government’s recognition of the vital role credit unions play in strengthening financial resilience and improving financial inclusion across Great Britain.
“Reforms to the common bond will enable credit unions to expand their reach, serve more communities and work together more effectively to deliver sustainable growth.”
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