A WOMAN has been arrested on suspicion of fraud following the collapse of the York-based North Yorkshire Credit Union (NYCU).

Police said the former employee was arrested yesterday morning and has since been released on police bail until January 17.

Detective Inspector Ian Wills, of North Yorkshire Police, said: “We are investigating a complaint against an ex-employee of North Yorkshire Credit Union, relating to two loans and two cheques with a total value of £3,130. The file has now been handed to the Crown Prosecution Service.”

The police investigation is separate to the one being conducted by the Financial Services Authority into what went wrong at the NYCU, which announced it had gone into liquidation one week ago, after six years of business.

Earlier this week a City of York Council loan of £100,000 made in 2008 was written off. But the council’s cabinet has approved a grant of £50,000 to South Yorkshire Credit Union, to help it establish a York branch.

Coun Carol Runciman, Liberal Democrat group leader on the authority, said: “We need to ensure that lessons are learned from this collapse. A full scrutiny review should reveal why the credit union failed and whether more could have been done to save it or protect the council’s investment as financial difficulties became apparent. A loan of £100,000 of public money is being written off, so we owe it to taxpayers to properly investigate the matter.”

The not-for-profit financial co-operative, which had offices in Holgate Road, was open to anyone who lived, studied or volunteered on a regular basis in York or North Yorkshire.