A row has erupted over a government consultation on Credit Union provision of social fund loans. The row is unfortunate as the credit unions are being portrayed by the tories as the bad guys when in fact they offer a generally excellent service. Many community credit unions are in deprived areas and offer a real alternative to door step lenders. William Hague’s comparison with store cards is disengenous. Yes credit unions can charge 2% a month, but this is more than ten times less than door step lenders charge. A quick look at their websites shows rates of 277% and more. I have blogged on this issue before.
The DWP has slowly been offering the credit union movement more and more involvement in the social security system. Already the DWP growth fund allows participating credit unions to lend to people not eligable for crisis fund loans but in need of credit. These loans are intended to be an alternative to doorstep lenders. They were introduced because the government recognised that credit unions offered an important and desirable service, but that they also had barriers which prevented some of the very poorest using them. Most credit unions require members to save with them for a set period before any credit can be obtained for people on benefit or very low incomes faced with an unexpected expense this can make a credit union loan unobtainable. Equally most community credit unions are too small to waive these rules as they cannot absorb bad debts. The Growth fund helps to bridge this gap.
If as the government now contends that these loans would be administered by credit unions but no interest levied then it is for indivdual credit unions and the movement collectively to decide whether it should be a sub-contracter to the DWP with the opportunities and problems that such contracts could bring. The Credit Union movement is by no means unified on what their future strategy should be inspite of what ABCUL would have the wider co-operative movement and government believe.
Filed under: General | Tagged: ABCUL, co-operative, credit unions, Doorstep lenders, DWP, Growth Fund, Social Fund, William Hague
[...] Fund – Government Response Posted on February 24, 2009 by mutualmoney Back in January we reported that a row had erupted over plans by the Department for Work & Pensions (DWP) to sub-contract [...]