Lord Kennedy of Southwark (Labour), vice chairperson of the All-Party Parliamentary Group on Credit Unions, opened the debate: 'I firmly believe that a vibrant credit union sector is vital as part of the landscape of different financial organisations offering a range of financial products to citizens.'
He explained 'on an international scale credit union membership and penetration into communities here is on a small scale.' He said: 'More than 1 million people in Great Britain use credit unions. In June this year, credit unions held savings for their members amounting to £776 million and had £602 million out on loan to members. In recent years, growth has been impressive.'
He stated: 'I contend that credit unions are the big society in action. I was delighted last week when we agreed an amendment to the Financial Services Bill that will cap the interest rates and other charges levied by payday lenders... I hope that the days of 4,000% interest rates from payday lenders will soon come to an end.'
He argued: 'The government and Parliament need to ensure that the legislative framework in which the credit union sector operates is modern, up to date, flexible and enables it to develop and meet the challenges and take up the opportunities offered by the modern world.'
Lord Collins of Highbury (Labour), opposition spokesperson for Work and Pensions and chairperson of Enterprise The Business Credit Union, explained: 'The investment in credit unions announced in June by the noble Lord, Lord Freud, following the decision to take forward the recommendations of the independent credit union feasibility study, is extremely welcome; it is terrific news... The project aims to increase credit union membership by at least 500,000 people on lower incomes by March 2015, and to increase this number to 1 million by 2017.
He added: 'Credit unions will find it difficult to reach the targets without the support of the government.'
The Parliamentary Under-Secretary of State, Department for Work and Pensions, Lord Freud (Conservative) responded on behalf of the government. He explained: 'Credit unions play an important part in their local communities by helping low-income consumers, and they can support our aims to tackle problem debt and increase financial inclusion.'
He explained: 'In June we announced that we would proceed with the project and make up to £38 million available over the next three years to credit unions that embrace change and modernisation. More than 60% of consumers contacted by the feasibility study wanted the type of local, trusted service that credit unions provide.'
He concluded: 'In the end, the credit union movement and credit unions themselves must step up and show they have the ambition to change and to serve many more people. It will require real leadership from the sector and a real will to modernise. I am sure that, together, we can develop a sector that is sustainable, innovative, and continues to be central to the communities it serves.'