Waging war on Wonga, with a little help from the church
Published at 07:36, Wednesday, 02 October 2013
THANKS to the Archbishop of Canterbury they suddenly found themselves the weapon of choice in the battle against payday loan companies.
For as the Most Rev. Justin Welby announced his “war on Wonga” following a meeting with its founder and chief executive Errol Damelin, credit unions were thrust very much into the public spotlight.
They were, said the head of the Church of England, himself a member of the Parliamentary Commission on Banking Standards, the means to help people with money problems.
They could offer low-interest alternatives to the high street lenders, actively helping the people who used them.
And by being professional and “engaged in their communities” these community financial co-operatives would reach those on low incomes with poor credit histories, he said.
His sentiments have been echoed by Hexham’s MP Guy Opperman.
But while he called for restrictions on advertising by payday loan companies, he also went a step further when he told the House of Commons that the solution could be found in the creation of local banks.
Would the expansion of credit unions alone, he queried, be “able to address the problems of high-cost credit”?
“I suggest that the mechanism by which people ought ultimately to borrow on a long-term basis is local community banks,” he said.
“They have all the flexibility, the clout and the borrowing power of a bank, as well as all the sympathetic community approach of a credit union, and the amalgamation of all those qualities will produce the best way forward.
“There are tremendous opportunities in our local areas to set up and expand these organisations.”
But whether credit union or local bank, do potential customers really know what they can offer?
According to the Association of British Credit Unions there are 40,258 credit unions in 79 countries around the world.
In Tynedale there are three – “pay points” run by dedicated local volunteers and all part of the Northumberland Credit Union based in Morpeth.
Hexham’s credit union opened five years ago, but has struggled to establish itself.
Run by the town’s community partnership from its Number 28 premises on Derwent Road, it had more than 60 members, prompting the launch in 2011 of a second paying-in point at Hexham Community Centre.
Unfortunately, a fall in demand saw this close earlier this year leaving the credit union to consolidate its services at its East End offices.
Now, however, chairman of the Northumberland Credit Union, Nic Best, wants to try again and establish a second pay-point in the town centre.
And he believes the unions could eventually rival the banks if they were to get the support of their local communities.
“With the Archbishop and Guy Opperman speaking out it does raise the profile of credit unions with people asking what we are and seeking us out,” he said.
“The name ‘credit union’ doesn’t inspire. Put ‘credit’ and ‘union’ together and most people don’t think you’re on to a winner, that’s why some are calling themselves community banks.
“However, unlike the banks and the payday loan companies the money we get is being used within Northumberland for Northumbrian people.
“Some people still don’t quite understand us, but we are working on that, particularly in Hexham.
“At Number 28 we got a lot of help from social landlord Isos to help set the union up and promote it; now there’s enthusiasm for a second branch.”
Unlike its near neighbour in the south-east of the county, the Northumberland Credit Union doesn’t undertake credit checks and, therefore, doesn’t offer instant cash.
Nic argues that this encourages members to save before offering loans, helping people handle their money better and preventing a decline into debt.
The Prudhoe pay-point in the Spetchells centre has been running for 10 years and currently has about 100 members.
Long-serving volunteer Nino Tomczuk believes the union is struggling to compete with the high-profile payday loan companies, despite their extortionate interest rates.
He said: “At a time of austerity when people are hard up we offer good loans at a low rate, but we can’t operate the way the likes of Wonga do, which gives out instant cash.
“We get people coming to us who want to buy school uniforms and fix washing machines.
“If people are desperate they will go to these payday loan companies for the money straight away and to hell with the consequences. By the time the interest rates kick in, it’s too late.
“We’ve tried to get more people interested in the credit union, but we just don’t get the response we should.”
Allendale lost its last remaining bank in the summer of 2011, but despite this, its credit union, established in January 2010, only has 15 members.
A scarcity of volunteers means Christina John, of community charity Fawside, runs the pay-point from an office in the village hall.
She championed establishing a credit union in the village and argues strongly in favour of its benefits, but she knows there’s more work to be done before it is an integral part of community life.
She believes people would be more keen to join and to save with a credit union, if the money was deducted from their wage packet. Currently the Northumberland Credit Union requires that customers save with it for a period of eight weeks before a loan application is considered.
And she pointed out that the community element of the unions can sometimes prove to be a double-edged sword.
She said: “It’s great that you’re helping people you know, but if those people are struggling they don’t want members of their local community to know about it!”
Despite this, credit unions are growing in popularity, with plans to establish a fourth branch in Haltwhistle.
That’s music to Nic’s ears, but he knows the branches will only survive if there are people in these communities willing to help.
He said: “A branch needs a good location, volunteers to run it and members who want it.
“We just can’t go into an area and deliver what we have without the support of volunteers and members of the public.”
Published by http://www.hexhamcourant.co.uk
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