Severn Four Credit Union in Bristol closes
A Bristol credit union has been closed down as it has run out of money.
Severn Four, which served the city of Bristol and South Gloucestershire, was set up to help those who cannot get loans from banks.
But the Financial Services Compensation Scheme (FSCS) declared it was in default after some borrowers did not repay their loans.
The FSCS will now have to pay back the 1,500 investors in the credit union about £460,000.
Investors should get their money back within seven days of the credit union defaulting, and the appointed liquidator will contact each borrower to discuss repayment terms of loans.
'Grants running out'
David Hutt, who was a voluntary board member, said all credit unions found life quite difficult.
"Because we don't make a profit, because the rates of interest we're allowed to charge are fixed by the government, it's quite hard to generate income," he said.
"We've had various grants, but the grants have been running out and the reserves have become very low.
"Combined with that, the amount of bad debts we were seeing from our members had increased enormously."
Mr Hutt said it reflected "the economic situation in general" that members who had been "good risks" could not repay their loans.
He added the number of failing credit unions was increasing.
"There were six last year, six in 2011, and there have already been three this year," he said.
Severn Four had attempted a rescue plan with another credit union based in Bristol.
Harry Partington, chairman of Bristol Credit Union, said: "David and Severn Four approached us when they hit financial difficulties and asked us to consider a merger.
"We looked at ways of making that happen because we were very concerned about Severn Four's members.
"But our assessment of their lending books led us to the conclusion it wouldn't be in our members' best interest,"
A credit union is a financial co-operative owned and run by its members, and regulated by the Financial Services Authority.