An MP has demanded an official inquiry into the failed credit union in Kirklees.

Huddersfield MP Barry Sheerman wants to know why the Castle and Minster Credit Union collapsed, leaving thousands of members concerned about their funds.

There have been reports that many people had taken out loans with the credit union but had not repaid them and were not pursued.

But Mr Sheerman believes there could be a future for credit unions in the area and said: “Lessons must be learned”.

The credit union, based in Huddersfield, had been struggling after more than 40 years of trading.

At one point more than 11,000 had savings with the union.

It closed for good on Tuesday after directors decided the business was no longer viable without further external help.

It has entered into voluntary insolvency and liquidators will now be appointed.

But all savings are protected and will be paid back to members.

Castle & Minster Credit Union webpage

Kirklees Council had earmarked £200,000 for the credit union but never released the cash because strict conditions could not be met.

Mr Sheerman wants the Financial Conduct Authority, the regulatory body, to look at the workings of the credit union and he also wants a local inquiry into how and why it failed.

“I am not blaming any individual or saying there were faults, but we need to know what has gone wrong.

“I was a member of the credit union for years and I believe in the system. It would be very useful to look at how it was being run so that lessons can be learned for the future.

“It seems to me there was a major flaw in the system as many thousands of people backed the scheme.

“Let us take it to the FCA if is something has been done wrongly, it should be made public.

“I would hope we can learn from this episode and perhaps look at another credit union in the future. They are a great way of steering people away from unscrupulous lenders or payday loan companies which see many people end up in greater debt”.