FSA Raps 2 Glasgow Credit Unions

Kimberly Watson, Editor in Chief
March 27, 2012 /

The Financial Services Authority (FSA) has publicly censured two Glasgow based credit unions.

Pollok Credit Union allegedly jeopardised its own solvency, and therefore the interests of its members, by making large loans to a non-member while Shettleston and Tollcross Credit Union made loans to its directors on terms better than those available to its wider membership.

Pollok 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% of the credit union’s capital was tied up with the trust. The FSA’s rules state that individual large exposures must not exceed 25% of a credit union’s capital.

Shettleston and Tollcross 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 financial benefit to those who received loans was very small however and the directors have since agreed to repay it in full.

Tom Spender, head of Retail Enforcement at the FSA said: “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 Credit Union 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.

For Pollok Credit Union, the relevant period is 1 April 2008 to 31 August 2011. For Shettleston and Tollcross Credit Union, the relevant period is May 2006 and March 2007.

 

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