Credit union thrives as more shun exploitative payday lenders

Credit union thrives as more shun exploitative payday lenders

Credit union thrives as more shun exploitative payday lenders

First published in News by

MORE people are avoiding payday lenders and using a not-for-profit lending organisation.

That is the claim from the East Sussex Credit Union after its lending increased by 13% in 2013/14 with both loan numbers and size growing.

The union insists the increased level of borrowing is good news as more people are shunning payday loan companies in favour of what they say are their “fairer” and lower-interest loans.

The union supplied £1.2 million worth of loans to cash-strapped residents with cheaper interest rates than typical high street lenders. For example a £1,000 credit union loan borrowed over 12 months at 26.8% APR would have a total repayment figure of £1,134.72.

The same loan with sub-prime credit card Vanquis, charged at 39.9% APR, would total £1,193.87 while payday lender Pounds to Pocket, at 399% APR, would total £2,151.12.

Nikki Plummer, of the East Sussex Credit Union, said: “We’re seeing an awful lot of working people coming to us now who have payday loans that keep rolling over.

“Our policy is that we never lend to anyone that it doesn’t make sense to. We have an ethical lending policy which says that if people who come to us are going to be pushed financially or put under more stress, we’ll not lend to them.

“We don’t give loans without having a mandatory savings element either. Everyone that borrows from us has to save with us at the same time.”

Ms Plummer said the union did not make a profit from loans under £800 and its surplus, or profit, was made on larger loans.

The union revealed it made a profit of £24,200 in 2013/14, up from £6,700 in 2012/13, and members’ savings grew by 27%.

Richard Priestman, president of the East Sussex Credit Union, said: "These are really exciting times for East Sussex Credit Union.

"Over the coming year we are now very well placed to build on the progress we have been making. It is especially pleasing that awareness of the credit union is growing and that more and more local people are responding to our products and services.

“Just as importantly, the ongoing development of our business puts us in an even stronger position to continue to support the less fortunate in our community."

Comments (9)

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2:07pm Sat 19 Jul 14

Goldenwight says...

NOBODY would use a credit union as an alternative to a payday lender, they are not even in the same business.

ARGUS, withdraw this article which is completely misleading and totally untrue. You have 24 hours. Or maybe the moonpig will get you...
NOBODY would use a credit union as an alternative to a payday lender, they are not even in the same business. ARGUS, withdraw this article which is completely misleading and totally untrue. You have 24 hours. Or maybe the moonpig will get you... Goldenwight
  • Score: -4

2:22pm Sat 19 Jul 14

Harlem shuffle says...

Goldenwight wrote:
NOBODY would use a credit union as an alternative to a payday lender, they are not even in the same business.

ARGUS, withdraw this article which is completely misleading and totally untrue. You have 24 hours. Or maybe the moonpig will get you...
Exactly, a credit union will not lend to you if you have bad credit where as payday lender will, that is why people go to them.
[quote][p][bold]Goldenwight[/bold] wrote: NOBODY would use a credit union as an alternative to a payday lender, they are not even in the same business. ARGUS, withdraw this article which is completely misleading and totally untrue. You have 24 hours. Or maybe the moonpig will get you...[/p][/quote]Exactly, a credit union will not lend to you if you have bad credit where as payday lender will, that is why people go to them. Harlem shuffle
  • Score: 0

2:25pm Sat 19 Jul 14

HJarrs says...

Goldenwight wrote:
NOBODY would use a credit union as an alternative to a payday lender, they are not even in the same business.

ARGUS, withdraw this article which is completely misleading and totally untrue. You have 24 hours. Or maybe the moonpig will get you...
I think that you are wrong. Credit Unions help some people begin to have a financial literacy and to be able to manage finances, so keeping out of the clutches of payday lenders.

Last year I stuck up conversation with a couple of blokes in a pub thinking of going to a payday lender. I took them through the implications, what interest payments really meant and other means of meeting the same ends without being fleeced. I found it a chastening experience that some have such a poor grasp of finance, to their great detriment. I hope I helped stop them from being fleeced.

The pay day lending industry is primarily geared to take advantage of people who I can only clumsily describe as being financially dyslexic. It is robbery of the vulnerable.

I hope many more people discover credit unions, which are members helping each other to access reasonable cost finance.
[quote][p][bold]Goldenwight[/bold] wrote: NOBODY would use a credit union as an alternative to a payday lender, they are not even in the same business. ARGUS, withdraw this article which is completely misleading and totally untrue. You have 24 hours. Or maybe the moonpig will get you...[/p][/quote]I think that you are wrong. Credit Unions help some people begin to have a financial literacy and to be able to manage finances, so keeping out of the clutches of payday lenders. Last year I stuck up conversation with a couple of blokes in a pub thinking of going to a payday lender. I took them through the implications, what interest payments really meant and other means of meeting the same ends without being fleeced. I found it a chastening experience that some have such a poor grasp of finance, to their great detriment. I hope I helped stop them from being fleeced. The pay day lending industry is primarily geared to take advantage of people who I can only clumsily describe as being financially dyslexic. It is robbery of the vulnerable. I hope many more people discover credit unions, which are members helping each other to access reasonable cost finance. HJarrs
  • Score: 6

5:55pm Sat 19 Jul 14

randomthoughts says...

Interesting. Actually Credit Unions encourage people not to use pay day lenders & come up with a longer term solution to stop people going backwards & forwards at completely rip off rates. Pay Day lenders are so bad at last the goverment is going to stop them taking advantage of financially vulnerable people & quite right too.
Also the business model of the credit union is to encourage savings by members to lend to other members at favourable rates recycling the money in the local community. They do not have shareholders & are owned by their members.
They also take on lots of volunteers who improve their skills & 67% of the volunteers then go on to find paid employment.
As far as I can see it is a win win situation.
Interesting. Actually Credit Unions encourage people not to use pay day lenders & come up with a longer term solution to stop people going backwards & forwards at completely rip off rates. Pay Day lenders are so bad at last the goverment is going to stop them taking advantage of financially vulnerable people & quite right too. Also the business model of the credit union is to encourage savings by members to lend to other members at favourable rates recycling the money in the local community. They do not have shareholders & are owned by their members. They also take on lots of volunteers who improve their skills & 67% of the volunteers then go on to find paid employment. As far as I can see it is a win win situation. randomthoughts
  • Score: 3

6:00pm Sat 19 Jul 14

Gaz the great says...

Ok, so whilst paying about 0.5% intrest rate on monies up to 15 grand, they charge a rather low 22.9% intrest rate on low cost loans! American Express only want 14.9% up to 100,000 on my card so no, they are also a pay day lender type of company. Seen their spill, don't buy it at all!
Ok, so whilst paying about 0.5% intrest rate on monies up to 15 grand, they charge a rather low 22.9% intrest rate on low cost loans! American Express only want 14.9% up to 100,000 on my card so no, they are also a pay day lender type of company. Seen their spill, don't buy it at all! Gaz the great
  • Score: -4

1:42am Sun 20 Jul 14

martyt says...

not for profit what a load of **** if you borrow 1000 pounds you have to 500 pounds in savings ,so really your borrowing your own money back and paying interest on your own 500 pounds and the 500 pounds you borrowed from the credit union ,what a con ,
not for profit what a load of **** if you borrow 1000 pounds you have to 500 pounds in savings ,so really your borrowing your own money back and paying interest on your own 500 pounds and the 500 pounds you borrowed from the credit union ,what a con , martyt
  • Score: 0

7:53am Sun 20 Jul 14

Plantpot says...

I'm completely baffled by this story. It looks as if Credit Unions provide facilities to people that that don't need payday loan co.'s? The payday loan co.'s exist to provide relatively small loans for a short term only. For example, if you borrow £150 for 30 days from Wonga.com, the fee/interest is £13.28, which seems entirely reasonable. The challenge comes when someone has taken out the loan with no real idea as to how it is to be paid back. After all, if you can't see 30 days ahead.....

If you take a personal loan with HSBC, (as long as you're a customer), a £1k loan over 12 months will be cheaper than with a credit union. Lloyds Bank would be cheaper too. So I'm completely baffled by the substance of the "story".
I'm completely baffled by this story. It looks as if Credit Unions provide facilities to people that that don't need payday loan co.'s? The payday loan co.'s exist to provide relatively small loans for a short term only. For example, if you borrow £150 for 30 days from Wonga.com, the fee/interest is £13.28, which seems entirely reasonable. The challenge comes when someone has taken out the loan with no real idea as to how it is to be paid back. After all, if you can't see 30 days ahead..... If you take a personal loan with HSBC, (as long as you're a customer), a £1k loan over 12 months will be cheaper than with a credit union. Lloyds Bank would be cheaper too. So I'm completely baffled by the substance of the "story". Plantpot
  • Score: 0

7:54am Sun 20 Jul 14

Plantpot says...

randomthoughts wrote:
Interesting. Actually Credit Unions encourage people not to use pay day lenders & come up with a longer term solution to stop people going backwards & forwards at completely rip off rates. Pay Day lenders are so bad at last the goverment is going to stop them taking advantage of financially vulnerable people & quite right too.
Also the business model of the credit union is to encourage savings by members to lend to other members at favourable rates recycling the money in the local community. They do not have shareholders & are owned by their members.
They also take on lots of volunteers who improve their skills & 67% of the volunteers then go on to find paid employment.
As far as I can see it is a win win situation.
Have you actually looked at the rates for, say, a Wonga loan?
[quote][p][bold]randomthoughts[/bold] wrote: Interesting. Actually Credit Unions encourage people not to use pay day lenders & come up with a longer term solution to stop people going backwards & forwards at completely rip off rates. Pay Day lenders are so bad at last the goverment is going to stop them taking advantage of financially vulnerable people & quite right too. Also the business model of the credit union is to encourage savings by members to lend to other members at favourable rates recycling the money in the local community. They do not have shareholders & are owned by their members. They also take on lots of volunteers who improve their skills & 67% of the volunteers then go on to find paid employment. As far as I can see it is a win win situation.[/p][/quote]Have you actually looked at the rates for, say, a Wonga loan? Plantpot
  • Score: 0

10:11pm Tue 22 Jul 14

Can this be says...

Plantpot wrote:
I'm completely baffled by this story. It looks as if Credit Unions provide facilities to people that that don't need payday loan co.'s? The payday loan co.'s exist to provide relatively small loans for a short term only. For example, if you borrow £150 for 30 days from Wonga.com, the fee/interest is £13.28, which seems entirely reasonable. The challenge comes when someone has taken out the loan with no real idea as to how it is to be paid back. After all, if you can't see 30 days ahead.....

If you take a personal loan with HSBC, (as long as you're a customer), a £1k loan over 12 months will be cheaper than with a credit union. Lloyds Bank would be cheaper too. So I'm completely baffled by the substance of the "story".
Please get your facts straight so people can make up their own well-based view. A WONGA loan of £150 over 30 days will have Fees and Interest totalling £52.15, not the £13.28 you state.

You can make all sorts of comparisons with other potential lenders, but are the loans available to those with less assets or income and, if so, are they available at the headline grabbing rate? The small print is often very restrictive.

Anyone wanting £100k off American Express can do much better than 14.9% and whilst the Credit Union does not go to loans of that size its rates for larger loans are less than 14.9%. Anyone with the availability of those sorts of sums should be saving in the Credit Union to help the less well off.
[quote][p][bold]Plantpot[/bold] wrote: I'm completely baffled by this story. It looks as if Credit Unions provide facilities to people that that don't need payday loan co.'s? The payday loan co.'s exist to provide relatively small loans for a short term only. For example, if you borrow £150 for 30 days from Wonga.com, the fee/interest is £13.28, which seems entirely reasonable. The challenge comes when someone has taken out the loan with no real idea as to how it is to be paid back. After all, if you can't see 30 days ahead..... If you take a personal loan with HSBC, (as long as you're a customer), a £1k loan over 12 months will be cheaper than with a credit union. Lloyds Bank would be cheaper too. So I'm completely baffled by the substance of the "story".[/p][/quote]Please get your facts straight so people can make up their own well-based view. A WONGA loan of £150 over 30 days will have Fees and Interest totalling £52.15, not the £13.28 you state. You can make all sorts of comparisons with other potential lenders, but are the loans available to those with less assets or income and, if so, are they available at the headline grabbing rate? The small print is often very restrictive. Anyone wanting £100k off American Express can do much better than 14.9% and whilst the Credit Union does not go to loans of that size its rates for larger loans are less than 14.9%. Anyone with the availability of those sorts of sums should be saving in the Credit Union to help the less well off. Can this be
  • Score: 0

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