1,000 caught up in credit union collapse

The Whitmore Reans Credit Union had been dragged down by a series of bad debts, which left it unable to repay the deposits of the 981 members. They will get their money back through the UK's banking compensation fund.

The Financial Services Compensation Scheme, set up to protect savers in 2000, was called in with administrators from accountants Cork Gully when the volunteers running the credit union realised they were in trouble.

The credit union stopped trading and was declared in default on Monday. The FSCS has written to all the members listed on the credit union's records to tell them they will be automatically compensated within seven days "without having to lift a finger".

Jo Milner, one of the administrators from Cork Gully, said: "Because we were able to manage the collapse, the FSCS had payments going out within three or four hours of the collapse, making this one of its fastest-ever compensation schemes."

People with up to £1,000 in their account will receive a letter to get cash over the counter at their local Post Office. Anyone with more than this will receive a cheque direct from FSCS.

Mark Oakes, spokesman for FSCS, said: "FSCS is protecting Whitmore Reans members. We're here for you and we're ready to help. Your savings are protected up to £75,000 (£150,000 for joint accounts) and you should get your money back within the week. The process is automatic too so you won't have to apply for compensation.

"This credit union had seen a high level of debts going bad and that eventually had an impact on its ability to continue operating."

Those who owe money to the credit union have been contacted by Cork Gully and will be able to repay their debt on the same terms as before, said Jo Milner. She said there were between 400 and 500 loan accounts in operation.

Meanwhile the neighbouring Wolverhampton City Credit Union is stepping in to offer saving and borrowing services to the Whitmore Reans members, operating from the collapsed credit union's offices at Waterloo Terrace, on Newhampton Road East.

Matt Goulding, manager of Wolverhampton City Credit Union (WCCU) said the membership fee to join the 7,000 strong credit union would be waived for members of Whitmore Reans Credit Union who wished to join.

He said: "The demise of Whitmore Reans Credit Union is a cause of sadness and we feel greatly for the many loyal savers and members of this organisation. At the same time, it is important to point out that this is a relatively rare occurrence in a growing credit union sector that has assets of £1.32 billion in the UK."

"Here at Wolverhampton City Credit Union we offer a very safe pair of hands to members who want an affordable and ethical alternative to high-interest payday lenders. Owned by our members, we operate with a professional team. We are in good financial health with savings of £2.25m, an annual surplus of £105,000 and last year, we enjoyed record growth in membership."