Credit Unions

Martin Rhodes Excerpts

Wednesday 16th July 2025 Westminster Hall

[Martin Rhodes (Glasgow North) (Lab)]

It is a pleasure to serve under your chairship, Mr Twigg. I commend my hon. Friend the Member for Cumbernauld and Kirkintilloch (Katrina Murray) for securing the debate and for her speech highlighting the importance of credit unions, both now and in the future.

As financial co-operative organisations, credit unions are a force for good in many communities and workplaces. They exist to support their members, not to maximise profit. They encourage savings and provide financial education and affordable loans, all the while circulating the money within their membership communities, which are bound together through a common bond, often based on a workplace or location. More than ever, it is vital for that type of organisation to be available in communities that are currently struggling with the cost of living crisis and are vulnerable to predatory credit and debt organisations. It is the place of responsible Government to support these organisations and their efforts to promote financial inclusion, wellbeing and stability.

As already mentioned, there is variety and diversity in credit unions. There are large credit unions, such as Scotwest credit union in my constituency, which is one of the largest in the UK. It has over 36,000 members and, as of September 2024, a loan book of £68.9 million. It describes its mission as being focused on broadening financial inclusion, supporting members’ financial wellbeing and security, and strengthening local communities, all while promoting environmental sustainability through responsible lending and consumption. There are also local, community-based credit unions, such as Ruchill credit union, which was set up in my constituency, and workplace and employment-based credit unions, such as the Transport credit union in my constituency.

The diverse range of credit unions offers responsible lending while promoting co-operative values. That is why, as my hon. Friend the Member for Cumbernauld and Kirkintilloch mentioned, it is concerning to hear reports that the Financial Ombudsman Service, which is responsible for resolving disputes between financial institutions and their consumers, is using commercial lending rules to make legally binding judgments on credit unions.

The sector has raised concerns that credit unions are now being held to the Financial Conduct Authority’s consumer credit sourcebook rules, even though they do not legally apply to credit unions. As our credit unions are already under pressure and often based in low-income communities, that weakens the legal certainty and operational viability of the sector at a time when it is more necessary than ever.

[Chris Bloore (Redditch) (Lab)]

I congratulate my close friend, my hon. Friend the Member for Cumbernauld and Kirkintilloch (Katrina Murray), on securing this important debate. My hon. Friend the Member for Glasgow North (Martin Rhodes) made a powerful point about what happens in communities when credit unions go bust because they face huge regulatory burdens. My town, Redditch, has lost three credit unions over the last decade, meaning that because people cannot access financial support from the mainstream banks, they fall prey to speculative and very high-interest financial products from companies that should know better. Credit unions protect some of the most vulnerable people in our society.

[Martin Rhodes]

I agree that although we need robust regulation, we need to ensure that it is supportive of credit unions, particularly at a time when many communities need them more than ever and the challenge of organisations that seek to exploit vulnerable communities is very much at the fore.

Credit unions as institutions act as important protections against pernicious credit and debt systems such as buy now, pay later schemes. Since 2020, the market for buy now, pay later has more than quadrupled. There are reports of many in the UK getting into unsustainable debt because of balancing multiple buy now, pay later services to pay for essential groceries and other supplies. Unlike the work of credit unions, buy now, pay later schemes can use the cost of living crisis to market aggressively, targeting vulnerable consumers. They are often debt traps for the worst off in society.

While I support the Government’s planned new rules, which will ensure that buy now, pay later users will gain stronger rights and clearer protections, we must also do more to promote positive alternatives such as credit unions. These not-for-profit organisations exist to support their members, not to extract profit. They are local financial institutions that provide responsible lending and financial health advice, and they are safely regulated. In a world with loan sharks preying on the vulnerable, and tech companies creating debt prisons through unregulated consumer debt, we must support credit unions. If we do not, not just individuals but our economy and society will be worse off without them.

[Several hon. Members rose—]