Probe call over credit union debt

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OPPOSITION councillors have submitted a formal bid for a review into the collapse of a Yorkshire credit union which led to the loss of hundreds of thousands of pounds of taxpayers’ money.

More than 5,700 savers were affected when the North Yorkshire Credit Union was placed into liquidation last week after accruing outstanding debts of more than £400,000 since being launched in 2009.

It was funded by a £200,000 start-up loan from North Yorkshire County Council and a further £100,000 from York Council. The loans from both councils have now been written off with the collapse of the credit union. A replacement organisation, overseen by the South Yorkshire Credit Union, is due to be launched with a further £100,000 grant from the two authorities along with Scarborough Borough Council.

Liberal Democrats on York Council have called for a review to ensure lessons are learned. The proposed review will be discussed by the corporate and scrutiny management committee on Monday.

The Lib Dem group leader Carol Runciman said: “The North Yorkshire Credit Union has had cross-party support from the outset and it provided a vital service particularly for residents with poor credit ratings who might otherwise have fallen prey to loan sharks. This is not the time for political battles – we must work together to learn the lessons of this episode and ensure that York has a viable credit union to promote financial inclusion.”

But the council’s Labour leader James Alexander accused the previous Lib Dem administration of approving the £100,000 loan without “sufficient oversight of how it would be repaid”.

Credit unions have been heralded as vital amid the economic slump as they are not-for-profit co-operatives in which members’ savings are used to provide cheap loans. However, the North Yorkshire Credit Union was plagued by bad debts on loans as well as increasing overheads and an over-dependence on one-off grants.