Refunds sent to savers of stricken credit union

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THOUSANDS of savers have been sent payments for cash they invested in a Yorkshire credit union before its collapse as politicians agreed to an emergency financial package to establish a replacement organisation.

More than 5,700 savers have been affected after the North Yorkshire Credit Union was placed into liquidation last week after accruing outstanding debts of more than £400,000 since being launched three years ago. Payments to the majority of the savers were posted yesterday by the Financial Services Compensation Scheme, which is due to refund the credit union’s remaining members in the next few days.

York Council’s cabinet and North Yorkshire County Council’s executive both met yesterday when members agreed contributions to a fund totalling £100,000 which will pay for a new credit union which is due to begin operating later this month.

It will be overseen by the South Yorkshire Credit Union, which has been operating for the last decade.

Scarborough Borough Council is also due to contribute to the fund as the district has some of the county’s most deprived communities and had a large number of investors in the previous credit union.

The Yorkshire Post revealed yesterday that senior councillors had pledged to carry out a full investigation following the collapse of the credit union after it emerged it had been plagued by severe financial difficulties for the last two years.

The credit union was plunged into a deepening financial crisis due to a high level of bad debts on loans made to customers as well as increasing overheads and an over-dependence on one-off grants.

Calls have been made for a public inquiry to investigate the collapse of the union which was set up with £300,000 of taxpayers’ money.

Credit unions had been heralded as vital to providing a financial lifeline amid the economic slump because they are not-for-profit co-operatives in which members’ savings are used to provide cheap loans.