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January 25, 2012

The time has come for change


The seasonal spending splurge has no doubt pushed many into the clutches of moneylenders –   legal or otherwise, where the interest rate can quickly spiral into several thousand per cent.  While it’s a continuing mystery as to why Government refuses to regulate the excesses of this murky industry, it has at least introduced some changes that will help the credit union movement to grow.  With the popularity of high street banks at an all-time low, perhaps this is the moment credit unions have been waiting for.




Jan 2012, Daily Mirror

Greedy bankers beware! A new force is about to hit the High Street with fair and affordable financial products for all.

Credit Unions have been given new powers this week, which means they can offer a real alternative to the big boys who rule the financial world.

They can now offer a financial lifeline to millions more low-income families who don’t qualify for any mainstream credit and are forced to turn to rip-off loan sharks. Plus, credit unions will be a more appealing haven for savers too.

New rules allow these independent financial co-operatives – owned and controlled by their members and with no outside shareholders to pay – to extend their services to a whole new range of people.

They previously had to prove that their members had something in common, such as membership of a trade union or other organisation.

Now they are allowed to serve more than one group of people and their members can include, say, tenants of a housing association or employees of a national company.

And to attract more savings they can now pay interest, which means they can compete with banks and building societies. In the past, credit unions could offer only a yearly dividend based on how well they had performed. This will enable them to bring in more funds that will help more people with credit.

Mark Lyonette, chief executive of the Association of British Credit Unions, says: “The new powers are great news. They will give credit unions the opportunity to offer more services to many more people.

“Over the coming months, many more individuals, businesses and organisations will gain access to fair and affordable financial services in their communities.

“Credit unions will be able to provide a more effective alternative to high street banks on the one hand and high-cost lenders and loan sharks on the other.”

Crucially, the rule change will help prevent the most vulnerable people from ending up in the hands of ruthless doorstep lenders who flog easy credit at extortionate rates.

Interest rates on loans are around 12%, affordable and fair, compared to the thousands of per cent charged by dodgy loan sharks.

And they promote better money management by encouraging people to save up and helping them to budget properly and stay within their means instead of constantly overstretching themselves.

While the new powers for credit unions are definitely great news, there is still a lot more that could be done to give everyone access to the basic financial services they have a right to.

Children’s charity Barnardo’s wants credit union services made available through the Post Office.

This is already on the cards… but only if the Government coughs up the sum of £73million which it ¬promised in March last year to help modernise credit unions. This cash would let them link up with the Post Office network.

It would give people access to full transactional banking, weekly and fortnightly bill payments, savings and low-cost credit.

But, as usual, the Tory-led Government is dragging its heels on something that would help the most needy in society.


Credit union helped me out of debt spiral

Mum Debbie Young ended up thousands of pounds in debt after turning to doorstep lenders when she hit financial difficulties.

But now she is on her way to being debt-free and has savings – all thanks to her local credit union.

“I used to dread the knocks on the door from burly blokes, knowing I didn’t have the cash to make the repayments,” says Debbie, 43, from Gravesend in Kent.

“I started off borrowing £50 and that quickly went up to £250 as I took out a couple of loans. But soon, I owed a scary £2,000 and was desperately trying to come up with £40 a week in repayments, which I just couldn’t afford.”

Through her local Sure Start centre Debbie heard that a credit union was opening in Gravesend and she made an appointment to chat over her financial situation. Within a week she had a low-cost loan with affordable weekly repayments.

“I was so relieved when they said I could borrow enough to clear my debts and it would only cost me £16 a week, a much more manageable amount. The credit union went through my finances and worked out what I could actually afford, rather than something way out of my reach.

“I feel so much better now that I’m in control of my money. The credit union has even got me into the savings habit. I’m putting a bit away each week so I have something to fall back on in the future.

“They really are helping me to manage my money better.

“People should make sure they know what they are signing up to, that they can afford the repayments and ask what happens if they can’t afford them.

“It really isn’t worth the heartache of getting into debt and having all the stress and worry.

“I will never go back to doorstep lenders. It’s just a downward debt spiral with no checks on what you can afford and no way out once you get trapped.”