North Yorkshire Credit Union collapses
- 1 November 2012
- From the section York & North Yorkshire
About 5,000 savers have been told their money is safe after the North Yorkshire Credit Union was declared insolvent.
The Financial Services Compensation Scheme (FSCS) protects savers when authorised financial services firms fail.
It said savers who have invested a total of £1.9m in the union would be repaid within seven days.
The credit union said it was no longer able to meet its expenses.
Established in 2009, the credit union stopped issuing loans and accepting new members in October.
At the time it said it was due to a reorganisation of its services.
Janet Looker, City of York Labour councillor and chairwoman of the board of directors of the union, said: "It's always difficult for any financial institution to balance its finances. The expenses were just too much.
"We tried to improve the situation but we would have needed significantly more time to come back out of it."
North Yorkshire County Council said it would meet on 6 November to consider a one-off grant to the South Yorkshire Credit Union to establish a new service in the county.
Councillors will be told the collapse of the existing union was due to high-levels of bad debts on loans made to members, high overheads and an over dependence on non-recurring grants.
Credit unions are not-for-profit co-operatives in which members' savings are used to provide cheap loans.
The FSCS said people with less than a £1,000 deposit will receive a letter to get their money over the counter at the Post Office.
Anyone with more than £1,000 in savings will receive a cheque.
Members who have loans from the union will be contacted about where to make future payments, the FSCS said.