The Treasury announced on Wednesday a proposal letting credit union members who move away refer relatives for membership, a change covering over 50,000 people in Great Britain.
Currently, a member must live in the same area as the credit union to make such a referral.
The 50,000 figure refers to people who cannot refer a relative or household member now but would be able to under the change, according to Bank of England data.
The measure was announced at the second reading of the Financial Services and Markets Bill in parliament, so it remains a proposal and is not yet law.
Lucy Rigby KC MP, economic secretary to the Treasury, said credit unions were at the heart of communities and that the Government was backing the sector’s growth.
“That’s exactly why we’re supporting the sector to grow and reach even more people,” she said.
Membership of a credit union depends on a “common bond” (the criterion that decides who may join), such as living in the same area or sharing an employer. The Financial Conduct Authority (FCA) said the bond is written into each credit union’s rules, which it registers, and can be changed by registering a rule amendment.
For credit unions in Great Britain, section 1A of the Credit Unions Act 1979 lists the permitted bonds. They include following a particular occupation, being employed by a particular employer and residing or being employed in a particular locality.
The same section says a relative in the same household as a member is treated as within the bond only if the credit union’s rules so provide. Section 1A was inserted into the Act on 8 January 2012.
The Treasury said the reform follows Government action to raise the membership cap on local credit unions from three million to ten million members. It described both as part of efforts to double the size of the sector.
Two further changes sit alongside them: letting students join their local credit union, and allowing members of employment-based credit unions to keep referring relatives after they retire.
The Treasury said the new change could give tens of thousands more people access to savings accounts and small loans at lower interest rates than are often available at high street banks.
Sarah Harrison, chief executive of the Building Societies Association, welcomed the proposal. She said allowing members who move away to continue providing a route into membership for relatives “removes an unnecessary barrier to credit union membership”.
Matt Bland, chief executive of All Together Money, called it another step towards “a more flexible legislative framework” for credit unions.
Laura Willerton, head of commercial deposits at The Co-operative Bank, said credit unions provide “a trusted route to affordable borrowing and savings”.
