Credit Union Can End The Debt Spiral (from Sunday Herald)

Credit union can end the debt spiral

GUEST VOCALS: Rod Ashley on local lending

IT WAS RECENTLY REPORTED THAT THE SUPER-RICH WERE THE ONLY ones who were not suffering in the credit crunch, with the wealth of the country's 1000 richest people rising by 15%. These individuals can negotiate the best deals and have the best financial minds working for them.

By contrast, the people hit the hardest are the less well-off in our society, who find themselves falling into an ever-deepening spiral of debt and the misery that goes with it.

I believe the answer is the credit union movement, which has never been more relevant to the money management needs of ordinary people.

Credit unions are co-operative financial organisations owned and controlled by a group of its members. The members share a common affiliation or bond, such as all working for the same employer, or geographical location. Members pool their savings and make loans to each other at low rates of interest. The credit union in turn pays out a regular dividend on savings, and offers a range of financial services to members, which now include current accounts and even mortgages.

All surpluses are reinvested for the good of members and the community. People helping people. It sounds simple, and it is - but it works.

Today, there are more than 500 registered credit unions in the UK, providing a valuable and unique service to more than 500,000 members.

Debt is all too easy to get into, and often impossible to escape. People have to realise that regular saving is the answer for expensive events that we know are coming, such as summer holidays and Christmas.

Even then, care has to be taken on where you put these savings, with the Farepak disaster being a lesson for many. The reaction of many credit unions to Farepak has been to start up secure Christmas savings schemes, which have proved hugely popular.

The latest available Scottish Household Survey for the Scottish government showed that in some areas of the country, half of all households have no savings - the Glasgow figure is 55%. That means there is no safety net, and often the only recourse is even more expensive debt.

In that case, the downward spiral continues. So I say go to your credit union, get straightforward financial products and services that work in your favour, then turn that spiral into an upward curve.

Rod Ashley is Chief Executive of Scotwest Credit Union

Add Comment

Posted by: Bawbee, London on 11:02am Sun 11 May 08

A timely and worthwhile reminder of the social value of not-for-profit credit unions, which provide a genuine and much-needed service for a sizeable minority of the UK population, as well as being popular in other supposedly "rich and highly-developed" countries as the USA, Canada and Australia.

Although viewed by some (including parts of the middle-class-oriente

d media) as a Victorian anachronism, credit unions are obviously still very necessary, a living repudiation of rightwing propaganda about the the "invisible hand" of the "free market" providing optimal outcomes for everyone.

What would be interesting to know is how many UK middle-class households are struggling financially but don't meet the minimum-income criteria to join a credit union and therefore have to rely on the rip-off merchants in mainstream "PLC" banking, who have to provide year-on-year shareholder value.

I suspect that the vast majority of UK households, right across the social spectrum, are, as the saying goes, just "a few monthly pay cheques from disaster".

Of course, credit unions are indicative of so many other related issues including low wages, unrealistic attitudes to money and debt, the incomprehension / apathy of our political leaders and growing wealth / income disparity in a supposedly "liberal" and "insurpassable" economic system - which is why it's slightly surprising that so few Sunday Herald readers have chosen to comment on this article.

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Posted by: Janet Mundy, West Lothian on 8:48am Mon 12 May 08

What minimum income criteria for credit unions? All that is asked by a credit union is that members save a very small amount of money regularly (e.g. Ł1 a week) even while repaying a loan. The total repaid to a credit union, including savings, still amounts to a far smaller amount than to a door-step lender (e.g. Ł12 a week for 52 weeks on a Ł500 loan, as opposed to Ł15 a week for 56 weeks).

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Posted by: Bawbee, London on 9:03pm Mon 12 May 08

Janet Mundy wrote:
What minimum income criteria for credit unions? All that is asked by a credit union is that members save a very small amount of money regularly (e.g. Ł1 a week) even while repaying a loan. The total repaid to a credit union, including savings, still amounts to a far smaller amount than to a door-step lender (e.g. Ł12 a week for 52 weeks on a Ł500 loan, as opposed to Ł15 a week for 56 weeks).

Janet -

Regarding minimum income criteria for credit unions, I was thinking of the USA, where credit unions apply to the National Credit Union Administration for Low-Income Credit Union (LICU) status.

Granted, the criteria for membership of UK schemes seems wide-open but many are clearly intended for the disadvantaged, and those who can't access mainstream banking services, eg this Yorkshire-based credit union is open to all but specifically targets those on low incomes or state benefits:-

http://www.rcuda.org

.uk/laser-credit-uni

on-ltd.htm

I think we can agree, Janet, that credit unions are a positive force for good (as your example illustrates), because they adhere to the bread-and-butter basics of saving regularly and borrowing sensibly!

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