THE MOUNTING debts imposed on people by payday lenders have shone a light on credit unions as a more ethical source of finance. But the mutual lenders are not just for moments of desperation. In the run-up to Christmas, Business Editor FINN SCOTT-DELANY finds out how East Sussex Credit Union reaches out to savers during the good times as well as the bad.

CREDIT unions have never really taken off in the UK.

Despite their popularity in Ireland and America the mutually-owned savings unions have remained on the margins.

But, after a major vote of support from the Government in the form of a £38 million funding for credit union expansion, they appear to be on the up.

Seen as a sustainable alternative to payday lenders and traditional banks, credit unions can consolidate potentially crippling debts and give financial advice in dire personal circumstances.

But far from being a service people turn to as a last resort, credit unions are being proposed as a sound investment for the future, a sustainable way of managing money.

Richard Priestman, president of East Sussex Credit Union (ESCU), explains: “A lot of people don’t know the credit union exists or they assume it’s just there for people in desperate financial situations.

“The message we want to get across is we’re a community organisation.”

Credit unions are member-owned financial co-operatives which promote thrift and provide credit and financial services including current accounts, payroll deductions, standing orders and insurance.

One feature of ESCU is a CredECard, pre-paid VISA cards which can be used at ASDA, Argos and B&Q, among others.

Users cannot use the cards at ATMs, just in store, and pay a small fee for the service – but benefit from a rewards programme and monthly rebates for saving help.

ESCU wants to discourage people turning to payday lenders for their Christmas shopping.

Mr Priestman said: “People need help particularly in the run-up to Christmas.

“What’s happening is they are opening pay day loans, which charge huge rates of interest, and getting into situations they can’t get out of.

“When they can’t pay the money back they end up with multiples of what they originally borrowed.

“There’s been a lot of clamping down on these companies but from our perspective it’s not changed very much. They’ve reduced ridiculous costs to slightly less ridiculous costs.

“We can’t charge interest like these companies and nor would we want to. The problem with payday loans is the debts spiral.”

“With payday lenders, borrowers can start out with a small loan, which quickly mounts with interest rates of more than 1000% APR.”

The credit union in comparison has reasonable rates and is an ethical way to save. It also offers larger loans up to £15,000 which last longer periods and generate more income for the credit union.

It also offers a payroll deduction scheme, where staff can pay an amount straight into a credit union savings account.

Mr Priestman says the union can help save for lifetime events such as a weddings and house deposits.

He added: “The credit union should not be seen as a poor person’s bank. You hear people say: ‘I hope I never need the credit union’.

“We’re a community-based organisation owned by members, an alternative to a bank.”

Someone who knows first-hand about the stresses of debts is Nikki Plummer.

Now the business development manager at the credit union, Nikki previously turned to payday loans in a moment of desperation.

She said: “My situation changed dramatically. I was earning good wages in the city and I got involved in a business.

“I gave up my job and got pregnant and then it all went horribly wrong.

“My circumstances completely changed within three or four months. My income plummeted and I couldn’t get a job.

“I was relying on my partner supporting us and we got into debt.

“I couldn’t get any credit and suddenly I become the target of these payday and doorstep lenders.

“You realise people do these things out of necessity, because you can’t get money anywhere else.

“I’ve been at both ends and it leaves you in despair. There’s an awful psychological effect. I was lucky that I had a house to sell.

“I can appreciate what it feels like because I never thought I would get into trouble.”

After having children Nikki volunteered with Lewes District Council and East Sussex Credit Union.

She is now a passionate advocate of the credit union and a fierce critic of what she sees as predatory lenders, who prey on council estates in Brighton and Lewes.

One customer she has helped is mother-of-two Zoe Jamera, 31, of Lewes.

Zoe was familiar with the credit union, which had helped her mother in her hometown of Birmingham, and so she naturally turned to its services in Sussex when she got into debt. She said: “I was really excited when they opened one down here. It got me out of a sticky situation.

“I had a Provident loan, and the credit union helped me get rid of my debts. People do get in trouble with door to door lenders. They get desperate and go for easy options.

“Credit unions are really there for you when you need them, I would recommend them.

“I’ve been getting all my money together in time for Christmas.

“They also do financial management courses which show you where your money goes and how to save it.”

As a community organisation the credit union also gives volunteers a chance of work experience to boost their CVs.

Other such people give up their time because of its ethical credentials.

Ann Link, of Lewes, volunteered for Transition Town Lewes, a forum for finding solutions to environmental problems, before getting involved with East Sussex Credit Union.

She said: “We help people get back on an even keel after getting into debt. Because there’s a saving element people end up with more money at the end of the month.

“I’ve spoken to two people who say it’s the first time they’ve ever had any savings.

“Credit unions have a supportive and friendly atmosphere and they welcome all kinds of people.

“In Ireland everyone’s a member. They are like banks, but here in the UK they’re not on that scale.

“There needs to be more promotion but we can’t spend too much because we’re an ethical organisation.”

Replying to Zoe Jamera’s comments, doorstep lender Provident Personal Credit said it supplies loans, typically of a few hundred pounds, over 14 to 110 weeks, with repayments collected weekly from customers’ homes by a company agent.

It said its agents make sure customers can afford the loan while the amount to be repaid is fixed at the outset and never rises.

Even if customers miss repayments, there are no extra charges.

The decision-making process takes place face to face over a number of days rather than within minutes online. A £300 loan over 32 weeks would incur charges of £180 with weekly repayments of £15.