Government announces support for armed forces credit unions

Following a Co-operative Party-led campaign, the Government has said it will work with credit unions to safeguard service personnel from predatory lenders

Co-operative Party


For immediate release:

Following a determined campaign by Co-operative Party MPs and Peers, the Royal British Legion and the Association of British Credit Unions Ltd (ABCUL) the Government has said it will establish a credit union for British soldiers and their families.

A quarter of those in our armed services earn less than £21,000 and are often targeted by payday lenders. This summer the Royal British Legion announced that the number using its debt-advice service rose by 450% between 2007 and 2011.

Labour and Co-operative Party member of the House of Lords, Lord Roy Kennedy, met with the Government Armed Forces Minister, Anna Soubry, after he tabled an amendment to the Armed Forces Bill that would have required the MOD to set up a credit union through payroll deductions for members of the armed forces.

The Minister’s personal commitment to Lord Kennedy was confirmed in Parliament this week by the Lords Minister for Defence, Lord Astor of Hever, who said that the MOD expected to launch the scheme in July of next year.

Labour and Co-operative Party Peer, Lord Kennedy of Southwark, who has been championing a credit union for members of the armed services, said:

“After sustained campaigning by colleagues in both the Houses of Commons and the Lords I am delighted that the Minister has now committed to a timetable for introducing a credit union for service men and women. We owe a duty of care to our soldiers and their families who are often struggling on low pay and that includes helping them avoid the misery of debt. Access to a credit union and a range of financial products could provide a real lifeline for members of our armed forces.”

The Ministry of Defence said it was also working on developing an education campaign to raise awareness of credit union to help military personnel make informed choices about their financial options.

The Minister also importantly confirmed that the MOD is working to develop a process for enabling ‘payroll deduction’ – one of the key benefits of credit union membership which is already provided by other major employers. This mechanism allows an individual to choose to make regular savings or loan repayments via their wages – helping to support good habits and avoid financial crises.

Credit Unions are mutual organisations owned by their members that offer a range of saving and loan products at competitive prices and at a time when other financial services providers are not meeting people’s requirements they have an important role to play.

Four million American military personnel are members of the US credit union Navy Federal which was set up in 1933.

Notes

  1. The Co-operative Party was established in 1917, at a time when Government was dominated by private business interests, to campaign for a level playing field for co-operatives. Today it campaigns for a “people’s rail”, and mutual solutions to education, childcare, housing, health and energy challenges.
  2. The parliamentary question and answer http://www.parliament.uk/business/publications/written-questions-answers-statements/written-questions-answers/?page=1&max=20&questiontype=AllQuestions&house=commons%2clords&member=4153&keywords=credit%2cunion
  3. Lord Kennedy’s speech from 29 July
    http://www.publications.parliament.uk/pa/ld201415/ldhansrd/text/140729-0001.htm#14072932000068
  4. The Bill
    http://services.parliament.uk/bills/2014-15/armedforcesservicecomplaintsandfinancialassistance.html
  5. The US has had a credit union, Navy Federal, since 1933 founded by soldiers returning from war were unable to access affordable credit. Lenders used to target military bases trying to hook American sailors and soldiers with their high cost financial services. Navy Federal now holds $55 billion in assets, has 4 million members, 235 branches and a workforce of over 11,000 employees worldwide.