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Keeing back the sharks
Adult membership of credit unions in the UK rises to highest ever level
Brian Brodie Chief executive, Freedom Finance
Recent analysis fi nds that membership of credit unions has risen to an all-time high, with these fi nancial institutions lending more money than ever as the cost-of-living crisis worsens. The Bank of England’s latest data shows
that over 1.9 million people in the UK are now members of a credit union. Borrowing from credit unions is particularly common in Northern Ireland with 615,543 members – a third (32%) of the UK’s total. As well as growing membership in the UK,
credit unions are also loaning record sums to members with total borrowing reaching £1.74bn at the end of 2021. This surpasses the pre-pandemic peak of £1.70bn. Credit Unions, as co-operative societies, are often able to off er smaller, shorter-term loans that can be diffi cult for borrowers to fi nd through other institutions. Other specialist lenders can also charge
very high interest rates with the majority of credit union loans made well below the maximum interest rate, an APR cap of 42.6% set by the government. In March, a report from the Centre for
Social Justice (CSJ) – Swimming with Sharks – revealed 1.08 million people are victims of loan sharks and called for reform to the Credit Union Act 1979, including the creation of a new Credit Union Mergers Fund. As a supporter of the CSJ’s Debt Policy
unit, we support the call for reform and a broadening of the types of credit available as the cost-of-living crisis continues to worsen and following the withdrawal of many short- term credit providers.
May 2022 In Focus
The Bank of England’s latest fi gures are
evidence of both the growing strain on household fi nances and the diffi culty many people face in obtaining aff ordable credit. The rising membership and loan volumes with credit unions in the UK demonstrate
that more and more people are looking for aff ordable credit products as cost pressures rise. With many short-term credit providers withdrawing from the market, Credit Unions now fulfi l a vital role in serving people left behind by mainstream lenders. The CSJ’s recent report on loan sharks
A strong choice of reputable providers of short-term loans and other credit will be essential to helping people through the current cost-crunch. A failure from the lending industry to provide this support will only drive more people towards insidious, illegal loan sharks
www.CCRMagazine.com
identifi ed Credit Unions as a vital fi nancial lifeboat for many people while also helping to build people’s fi nancial resilience by linking loans with savings. Raising awareness of credit unions will be an important fi rst step to give those struggling to penetrate the credit market another option to explore. Credit unions are only part of the solution.
A strong choice of reputable providers of short-term loans and other credit will be essential to helping people through the current cost-crunch. A failure from the lending industry to provide this support will only drive more people towards insidious, illegal loan sharks. CCR
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