Credit unions will soon be able to offer their services to more people as a result of a shake-up of existing rules.
The new powers are the result of legal changes which will give credit unions more flexibility to choose who can access their services.
From 8 January 2012, credit unions will be able to extend membership to more than one group of people, no matter where they live or work.
And for the first time, credit unions will be able to pay interest on deposits, instead of a dividend, while businesses and community organisations will be able to join a credit union and use the services it provides.
Credit unions provide a range of financial services such as affordable credit, current accounts, savings accounts and prepaid cards.
The Association of British Credit Unions Limited (ABCUL) says that the change will help individuals, businesses and other organisations access fair and affordable financial services in their communities and allow credit unions to provide a more effective alternative to high street banks on the one hand and high cost lenders and loan sharks on the other.
Up until now, credit unions have been hampered by outdated restrictions which meant all of their members had to have something in common (such as living in the same geographical area or working for the same employer); only individuals were able to become members, not organisations themselves; and credit unions could not pay interest on savings, only a retrospective dividend.
Credit unions no longer need to prove that all the eligible members have something in common, which will mean that credit union services can be extended to new groups much more easily.
"These changes are a major breakthrough in the delivery of credit union services to communities around Britain ," said Mark Lyonette, chief executive of ABCUL.
"The new rules mean credit unions can now compete more effectively with banks and other lenders to provide fair and affordable financial services.
"Credit unions will be able to reach many more people, helping them to develop a savings habit, which can only be good for communities."
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