The last few years has seen a growing problem with loan sharks: unscrupulous money lenders who prey on families on low incomes and sting them with extortionate interest charges which often equate to interest rates of several hundred percent per year. Once on the hook families find that they are unable to escape their debts because every bit of money they have gets scooped up in interest charges.
I have never had much time for banks. In my early career when we were in the middle of a dispute with our bank, I always remember one financial adviser shrugging his shoulders and telling me that banks are money lenders and if you look in the bible, they don’t come too high up. But the loan sharks who prey on those most in need are the worst type of money lenders and I would support clearer regulation to curtail their sharp practices.
In the meantime, we must do much more to highlight better ways of helping families manage their finances in difficult times. Last week I decided to join the Kernow Credit Union based at Redruth. I think that credit unions are a fantastic idea and we need membership of them to become the norm. The concept is what can best be described as ethical and safe banking. Those who demonstrate commitment and thrift by saving for at least three months are then able to borrow up to three times the amount that they have saved at low interest rates. They do not do “credit checks” on people. There are none of those “subject to status” caveats in the small print of promotional literature. Instead, people earn their status by being conscientious to the credit union and demonstrating that they are willing to put aside a set amount of money each week or month.
People save regularly and are allocated shares in the local credit union so that they become shareholders with an asset. The credit union pays an annual yield or interest on those shares which equates to about 2 percent, higher than most banks would offer at the moment. The rates on the loans tend to be comparable with good rates from high street banks but less than credit cards. There is also one additional bonus. A life insurance scheme is automatically included. On death, the credit union pays the next of kin double the value of the shares held in the credit union.
Credit Unions are very common in other countries. In Ireland, around 60 percent of families are members and they are also common in countries like Australia. At a time when commercial banks have lost their way, credit unions are a reminder of what old fashioned, community based lending should be and people who start saving today will be able to borrow for Christmas.
Kernow Credit Union is based on the ground floor of the Town Council office building, Penryn Street, Redruth, telephone 01209 314449. Their website is www.kfcreditunion.co.uk