Credit union cash in south west Durham is frozen

People hoping to make withdrawals from South West Durham Credit Union (SWDCU) are instead receiving letters setting out the FSA action.

Only a few who recently tried to withdraw or deposit cash are aware but it is thought up 1,000 members, many of them children, are affected.

Deposits are believed to be covered by the Financial Services Compensation Scheme, but payouts before Christmas are unlikely.

Hardest hit by the delays will be poorer families who use SWDCU as a low interest alternative to high street banks or costly hire purchase agreements. "The order was made a week ago to make sure (SWDCU) can't get into any further difficulties," said an FSA spokesman, last night.

"They can't make any new loans or take any new deposits.

"The only thing they can do is receive payments back.

"The consequence is that for a time it has been frozen and people can't get their money out but it doesn't mean they lose title to the money."

SWDCU's head office in Church Street, Shildon, County Durham, has been closed since Friday afternoon and no-one has made an official comment.

However, in the letter issued to members, Isobel English, on behalf of the management committee, urged members to honour their loan agreements.

"If you know anyone who has ceased paying the credit union please encourage them to commence payment," said Ms English.

"The bad debt is a large contributing factor to our current situation."

Ms English's letter said SWDCU is appealing the decision and has submitted an action plan heavily reliant on community fundraising.

She said: "We are required to elaborate on this plan to succeed in our request to allow us time to trade out of our current situation."

SWDCU is staffed mainly by volunteers who work from a number of temporary counters set up in church halls and community centres.

Anyone who lives or works in south-west Durham can join but loans - at an interest rate of about six per cent - are only made in proportion to the amount individuals have already saved.

One volunteer, who wished to remain anonymous, said: "Unlike some of the banks we have only ever encouraged responsible borrowing.

"You can't actually get a loan with us unless you are a saver and you must still save throughout the term of your loan.

"We've just become another victim of the credit crunch.

"If the banks can get themselves into difficulties then obviously so can we.

"The question is will the Government bail us out?

Helen Goodman, MP for Bishop Auckland, said she is looking for a speedy resolution and will urge the FSA to act as quickly as possible.

"This has come at a most unfortunate time and I will be looking into it," said Ms Goodman.

"Savers should benefit from deposit protection schemes but it is frustrating for people because they won't be able to get money out at Christmas time."

SWDCU formed in 2000 but was not registered with the FSA until 2002 when it started operating fully as a credit union.

Members and supporters include several councillors and former Prime Minister, Tony Blair, who joined with wife, Cherie, in December, 2004.

In 2006 SWDCU broke its own rules by offering local customers of the collapsed Christmas hamper firm, Farepak, a 250 loan, if they joined.

Brian Myers, county councillor for Willington, himself a SWDCU member, said the freeze will devastate many households this Christmas. "Credit unions are popular in socially deprived areas," he said.

"People are wanting their money out and they are maybe thinking of taking out loans and of course that money is not available to them.

"The danger is these people could find themselves in all sorts of trouble if they take out loans with less reputable organisations as they try to cope with Christmas."

*Are you a member of SWDCU and have you been affected? If so contact The Northern Echo on 01388-602232.