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The government’s policy towards consumer credit

saving what they could afford, borrowing what they could afford to repay, and

using direct debit facilities and ATM machines in the LINK network.

Ineffective regulation was another important issue limiting the growth of

credit unions in the United Kingdom. Prior to the Credit Union Act (CUA)

1979, credit unions were regulated under the Companies Act 1948 or the

Industrial and Provident Societies Act 1965, both of which were deemed

inappropriate.168 The government announced in November 1999 that credit

unions were to be brought within the scope of the FSMA 2000.169 From July

2002, credit unions have been subject to an increased level of regulation by the

FSA. As a result of this, credit unions are members of the Financial Services

Compensation Scheme (FSCS),170 a timely change, and one which was consid-

ered central to the credibility and viability of the movement more generally.

Members will benefit because their savings are protected and a large proportion

will be refunded in the event of a collapse.

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10â Conclusion

institution complies with the Act’s requirements will be taken into account

by financial regulatory agencies if the bank or savings association wishes to

expand, merge or acquire another like institution. The CRA 1977 is enforced

by agencies that are required to evaluate the bank’s record of meeting the credit

needs of its designated communities and to ‘take such record into account in its

evaluation of an application for a deposit facility by such institution’.173

Swidler noted that ‘the CRA 1977 is a controversial piece of legislation’,174

a view supported by Dahl et al. who commented that the CRA 1977 ‘played a

controversial role in encouraging financial institutions to make loans in neigh-

bourhoods with low or moderate incomes’.175 The CRA 1977 is still politically

popular and it has been argued that ‘the legislation has had a major influence on

reinvestment activity throughout the country and has brought greater attention

to local needs, especially in low-income and minority areas’.176 Brooke-Overby

described this legislation as ‘a crucial step toward, if not a key to, solving the

problems of inadequate housing, urban decay, and violence that have become

issues of national importance’.177

Could a similar law be introduced in the United Kingdom? The introduc-

tion of such a controversial piece of legislation remains unlikely because it rep-

resents a radical step toward imposing a series of social and moral obligations

on providers of credit. However, despite the best efforts of the government to

improve people’s access to consumer credit, it could be argued that the best way

for such access to be improved would be by primary legislation based upon the

CRA 1977.

Q6 Outline the key measures which have been introduced to promote access to

affordable credit.

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The government’s policy towards consumer credit

For individuals it can lead to higher credit charges, limited access to financial

products and services and lack of security, and it can inhibit employment.179

Furthermore, lack of access to affordable credit contributes to child poverty,

imposes additional costs on the state benefit system and is directly linked to

social exclusion.180 Social exclusion has been described as ‘complex and multi-

dimensional’ and it creates problems for families, the economy and ‘for soci-

ety as a whole’.181 The previous Labour government must be commended for

attempting to tackle this issue, which was largely ignored by a succession of

Conservative administrations. The SEU has been hailed as a success, but did

it achieve its objective in relation to access to affordable credit? There is little

evidence to suggest a reduction in the number of people who are financially

excluded.

The long-term solution could be legislation on community reinvestment

based on the CRA 1977 in the United States. Unfortunately, it appears that the

Coalition government does not have the political will to implement such a con-

troversial piece of consumer legislation. It appears that the government’s policy

towards the provision of credit in the United Kingdom has reverted to the pos-

ition prior to the recommendations of the Crowther Committee and the intro-

duction of the CCA 1974. After three decades of what can best be described as

a ‘laissez faire’ approach towards the regulation of the consumer credit market,

the government has decided, no doubt influenced by the impact of the ‘credit

crunch’ and increasing levels of consumer debt, to restrict the amount of credit

available through a series of legislative measures. In this author’s opinion, such

measures will have a minimal impact on the problems faced by an ever-increas-

ing percentage of the population in accessing affordable credit.