Financial experts have assured savers that they will not be out of after South Tyneside Credit Union called in administrators.
Work is underway to contact more than 4,000 people who had savings or loans with First For Money - which had offices in South Shields and Sunderland and has called in administrators.
Everyone who has savings with the union will have their money returned to them and that process is currently underway.David Fleetwood
Rumours have been circuilating that some people would not get money back.
Offiocials say this is untrue and administrators are currently working with the Financial Services Compensation Scheme to return balances to savers with letters being sent out in the post.
Chairman of South Tyneside Credit Union David Fleetwood said: “We have been informed some of the members have been told that not everyone will get their money back. That simply is not true.
“Everyone who has savings with the union will have their money returned to them and that process is currently underway.”
It was announced on Tuesday, administrators had been called into the credit union after the board took the decision to close.
It is understood, the decision was taken because strict financial requirements were unable to be met now and in the future by the union - which is regulated by the Bank of England through the Financial Conduct Authority and Prudential Regulation Authority.
The principal cause of the deterioration in finances was due to a recent and substantial decline in receipts from interest on loans to members which was the unions main source of income.
In the past the union had been supported through grants from local authorities, Department of Work and Pensions and other sources. However, this type of funding had not been applied for or received in several years, and the decision to close was not as a direct result of cuts to grants from the councils.
A spokesman for PKF Geoffrey Martin & Co overseeing the administration of the credit union said: “We have taken calls from people worried they will not get their money back.
“I can only reiterate people will get their money back.”
The administrators said in the vast majority of cases the FSCS aims to make payment within seven days, with more complex cases within 20 days.
*Moneywise Credit Union say people looking to continue to save as part of a credit union can contact them.
A spokesman for Moneywise Credit Union said: “We are a long-standing and profitable credit union providing a range of loan products and savings accounts that aims to benefit our members over the long term and we do not rely on grants to enable us to provide services.
We are based in the North East with offices in Byker and Stockton but many of our products can be accessed through our website so members do not need to live close to one of our offices to use our services.”
For details and how to join Moneywise visit www.moneywise.org.uk or call 0191 276 7963.