Ray Collins on expanding the use of credit unions to help people better manage their money
It is estimated that up to seven million people use sources of high cost credit and that 1.4 million have no transactional bank account. Of those with a bank account, 4 million people incur regular bank charges – with almost a quarter of them (0.85 million) being hit with financially crippling charges. Many need help to better manage their money.
At present, just 2% of people in Britain are members of a credit union, compared to 24% in Australia, 44% in the US and approximately 75% in Ireland. The credit unions operating here are extremely varied – not just in size and membership, but also in the services they offer. What they do share however, is a basic philosophy of mutual support and cooperation. The uniqueness of many credit unions is their connection to communities and a commitment to localism. These communities often want to save locally in order to provide lending opportunities to support local businesses and help regenerate and reinvigorate the local area.
This modernisation of credit unions has and will enable a much more fundamental change, one where they can shift from targeting the ‘financially excluded’ to becoming ‘fully Inclusive’. They are now teaming up with associations and charities to find innovative ways of meeting the needs of new members.
Available to all, accessed locally, fair, safe and simple – and bringing banking back into the heart of every community. The investment in credit unions announced by the government in June, in order to take forward the recommendations of the independent Credit Union Feasibility Study, is extremely welcome. £35.6m of funding support made available through consortia of credit unions will enable expansion through capacity building and collaboration.
We need to empower consumers, providing more information on the alternatives to the high-cost lenders. We need also to instil a culture of saving more early on in life – something that schools should more readily embrace
Trade Unions could also be doing more to provide information, as well as working with public sector employers to support payroll deduction schemes. More generally, they could be promoting the principles of credit unions, and developing their campaigns against payday loans into campaigns for credit unions would be a great start.
Earlier this year my own trade union, Unite pledged to challenge Britain’s payday lenders by establishing a nationwide credit union network. This followed their launch of a credit union in Salford and Steve Turner, the National Official involved, said: "We are trying to get to the point where you can get emergency loans through credit unions, to stop that third week being Wonga week.”
The time is now ripe for an expansion in the use of credit unions, and trade unions and others can help make that happen.
Lord Ray Collins of Highbury is a frontbench Labour Peer in the House of Lords
Published 13th September 2012