In praise of credit unions

MUCH indignation today on the apparent intention of the Department of Work and Pensions (DWP) to allow the charging of interest on Social Fund loans.

The minister responsible, Kitty Ussher, denied this was the case, but inevitably her denial was carried on the BBC site near the end of the story, after various rent-a-quotes had got their tuppenceworth in first. 

The good news is that there does seem to be a move towards encouraging more people on benefit to use credit unions.

I first became a member of a credit union in 1993. These really are fantastic organisations, which encourage you to save as well as borrow. The amount you’re allowed to borrow depends on how much you’ve already saved, and when your repayments on a loan are calculated, they include an amount that continues to be added to your “shares”, or savings, during your loan term so that, by the the time you’ve paid it off, you have more savings than when you took out the loan. And the rate of interest on loans is tiny compared with most banks.

It’s all good. 

So although the headlines today are all about how this evil “Ebenezer Scrooge” government is trying its best to force the poorest in society into the workhouse, I suspect all they’re doing is encouraging Bob Cratchit to consider cheaper, more responsible methods of borrowing. 

1951-xmas-humbug-scrooge

The Permanent Secretary at DWP was less than satisfied by the tone of that morning's press coverage

PS: As I was writing this post and looking up the correct spelling of “Ebenezer” on the web, I was reminded of the last time I had to write it. I was working at the Paisley Daily Express and had to write an advertising blurb for a local store which sold electrical items. The owner was part of that generation which still considered it acceptable to use people’s initial rather than full name in print. I didn’t realise this, so when I asked him what the “E” stood for, he said: “‘E’ as in ‘Ebenezer’…” So, naturally, I assumed his Christian name was Ebenezer, which is how it appeared in the next day’s edition. Turns out his name was Edward. Why couldn’t he just have told me that?

A complaint was subsequently made and I was not invited to write articles for this shop again.

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12 Comments

Filed under Hinterland, Media, Society

12 responses to “In praise of credit unions

  1. labourboy

    I think the main worry Tom is that these companies ‘typically’ charge between 12 and 25% interest. I don’t know loads about it myself but seeing as you seem to – how is that defensible? To charge the poorest and most indebted in society 25% interest on a loan??

  2. Kerry

    Have you joined the APPG on Credit Unions, Tom? It has an excellent Chair…

  3. Kerry – please accept this post as an intention to have my name added.

  4. John

    “but inevitably her denial was carried on the BBC site near the end of the story, after various rent-a-quotes had got their tuppenceworth in first.”

    Now just hang on a minute! A LABOUR MP, complaining about BBC bias? Christ! I laughed so hard a weaker man would have soiled himself! 😀

    There is so much pro-Labour bias going on at the Beeb that it’s widely regarded to be part of the government’s PR machine!

    In fact, as soon as I see something reported on the Beeb I immediately look elsewhere to see what the real truth of the story is.

    Also, you’re wrong. The government’s denial is at the very top of the page:

    “The government said the reform was “never our intention”, blaming a poorly drafted paper on the social fund, which a minister signed, for the confusion.”

  5. labourboy – go to any deprived community in the country and you’ll find credit unions doing a brilliant job of helping people manage their money. The two unions I’ve been a member of in the past both charged nominal rates of interest that were substantially less than any of the main lenders. I confess I’ve not looked at how recent base interest rate cuts have affected credit unions’ rates. But from a social justice perspective, credit unions are unalloyed good news for poorer communities (though many nowadays are workplace based, rather than geographical).

  6. How can you say that “credit unions are unalloyed good news for poorer communities ” without knowing what their interest rates are.

    Shouldn’t you check the facts before making such a statement?

    In any event I struggle to see how it is better to pay interest on a debt (however competitive) when you can currently get the loan interest free. How does that help the poor?

  7. “I struggle to see how it is better to pay interest on a debt (however competitive) when you can currently get the loan interest free. How does that help the poor?”

    As I explained in the post, and as the minister told the BBC, Social Fund loans – currently offered at zero per cent interest – will not be subject to interest. I was making a wider point about the good sense in introducing a wider range of people to the benefit of credit unions.

    I’m sorry, don’t you bother reading my stuff before commenting?

  8. Chris' Wills

    I have to agree that well run credit unions and co-operatives are excellent things, don’t have to be poor to benefit.

    They do sometimes suffer from lack of skilled staff, accounts and such like.

    On the interpretation put on the gubermints proposal, if they don’t want things mis-interpreted they should spell it out in plain English.
    Tighten up the wording, avoid any possibility of confusion.

    It seems fair to assume that this goverment will happily use laws in ways that most civilised people wouldn’t have considered, if they are lax enough.

  9. pr roger j clementine iii cbe

    Tam, god bless ye son.

    Ye just keep on trying yer best no matter what yer government does.

    It’s commendable, al gie ye that!

  10. Stephen

    Credit Unions typically charge 1% per month on the declining balance of a loan – APR 12.6%. The key issue which the middle class commenters on this blog seem to have missed is that Credit Union loans are accessible to people who are asset poor and are in competition with doorstep lenders, catalogues and loansharks, where the APR stretches well into 3 figures. For more information can I recommend the Scottish League of Credit Unions http://www.scottishcu.org

  11. labourboy

    Crikey, it’s funny but simply having the word ‘labour’ in my name makes people assume I’m really middle class. You’d think it would be the other way round really, I suppose I have Tony Blair to thank for that.

    My main point to Tom was that many credit unions ‘allegedly’ charge between 12.5 and 25% interest so I wondered how that could be a good thing per se. I got that figure not the news reports which were quoting from the government report!

  12. Johnny Norfolk

    Labour shooting themselves in the foot again.
    What a mess. How can you run a country when you cannot organise this.

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