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FSA censures two Glasgow credit unions

The FSA has publicly censured two Glasgow based credit unions for making large loans to a non-member and making loans to directors on terms better than those available to members.

Pollok Credit Union made a series of loans to a trust it had set up to manage a local post office and day-care centre. The trust was not a member of the credit union and the loans were contrary to its own procedures.

Pollok also breached FSA rules because the loans meant 88 per cent of the credit union’s capital was tied up with the trust. FSA rules state individual large exposures must not exceed 25 per cent of a credit union’s capital.

Shettleston and Tollcross Credit Union made loans to seven directors on better terms than those generally available to the membership.

The credit union removed the preferential rates when it realised this was not allowed, but did nothing to recover the lost earnings and paid a reduced dividend to its members as a result.  

The FSA says the financial benefit to those who received loans was very small and the directors have since agreed to repay it in full.  

FSA head of retail enforcement Tom Spender says: “Both these credit unions were established to help address financial exclusion in Glasgow, so their continued roles within the communities are vital.

“In these two cases a public censure was imposed however in different and more serious circumstances the FSA may have considered imposing a financial penalty as credit unions do not have immunity from our rules.

“Credit unions are there to protect their members and we will not hesitate to take action where their interests are put at risk.”

Pollok was found to have breached the requirement to conduct business with due skill care and diligence, while Shettleston and Tollcross was found to have breached the requirement for a firm to pay due regard to the interests of its members.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. “Credit unions are there to protect their members and we will not hesitate to take action where their interests are put at risk.”
    I must be missing something here FSA, if you had imposed a financial penalty would that itself not have imposed a financial penalty on the members who in effect are the union? If the FSA were really cross with them they could have “imposed” them out of existence!
    Nice to se the FSA going for the real villains for a change! (sic)

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