LONDON, U.K. – The English Department of Trade and Industry (DTI) is tackling the loan shark problem by modernizing the Consumer Credit Act of 1974. As the European Union also looks at ways to deal with the same problem, the Association of British Credit Unions Ltd. (ABCUL) says the strategy is not needed for credit unions. Credit unions in England, Wales and Scotland to this point have been exempt from compliance to the Act. ABCUL has announced that they support continued exemption, but it is because of the nature of credit unions and not that they are pro loan sharking. ABCUL's spokesperson Abbie Shelton said, "The Government's intentions to prevent vulnerable consumers paying an exorbitant cost for credit can best be achieved through ensuring that people have the option of obtaining affordable credit from their local credit union. The Government's support for credit unions' continued exemption from compliance with the 1974 Act, as well as their support for strengthening the credit union movement will help to ensure that vulnerable consumers have a more affordable option than the local loan shark." The changes are presently in the consultation stage, which means that interested groups that will be affected by any change, have a chance to comment. Credit unions are also exempt from compliance with Article 2.2 of the European Union's (EU) Consumer Credit Directive 87/102/EEC, which allows a Member State to exempt certain organizations provided they provide loan products lower than market rates and do not offer them to the general public. The directive specifies credit unions as long as the total charge of credit does not surpass 12.7%. Credit unions, as they are known in the United States, exist only in the member states of the United Kingdom and Ireland. The rest of the member states have co-operative banks that do not fall under the exemption. The EU has commented on different types of credit now available across borders that were not in existence when the original directive was written and seeks to harmonize the regulations among its member states. Some of the proposed regulations are what are taken for granted in the U.S. The new proposals would require consumers receive copies of written credit agreements. The agreements also should give the annual percentage rate, if and how the rate can be changed and any other "essential terms of the contract." ABCUL believes that its existing exemption is based on the fact that credit unions are not open to the general public. Unlike other types of loan providers, credit unions encourage savings with loans coming from the pooled savings of all members. Shelton said, "The encouragement of savings, as well as the availability of affordable credit provides an opportunity to break free from a cycle of debt that the provision of credit alone does not achieve." Likewise the Credit Union Act has limited the interest charged on loans to 12.68% APR and administrative charges are forbidden. ABCUL will provide their point of view to both the DTI and the EU. – [email protected]

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