Scotland's credit union customers have been promised greater protection as the services come under the control of the UK's main financial watchdog for the first time.

The loans and savings co-operatives will be regulated by the Financial Services Authority, which has also pledged to ensure greater transparency in the sector.

Credit unions have traditionally offered services to people in the lower income bracket and Scotland is said to account for a large proportion of their members, with an estimated 130,822 people using them.

'Fair and reasonable'

Customers will now have the same rights of redress as bank and building society customers, with access to the financial services compensation scheme and the financial ombudsman, should they have cause to complain.

The FSA said the new system would "help Scottish credit unions to achieve their objectives of providing a source of credit for members at a fair and reasonable rate of interest".

Victoria Raffe, head of credit union supervision at the FSA, said: "We believe that this new regulation will benefit both credit unions and their members, helping the unions to grow whilst affording greater security for members both present and future."