With the Christmas season ratcheting up the pressure to spend on those who cannot afford to do so, local MSP, Labour;s Jackie Baillie, speaking in a debate in the Scottish Parliament this week, drew attention to the work of two local credit unions and called for increased support for credit unions in general.
The pressure of consumerism at such a time compounds the daily route to borrowing for everyday necessities by so many of the needy. The obscenely exploitative rates charged by the seedy payday loan companies require to be made redundant for as many as possible – and Credit Unions exist to harness community support to sustaining the genuinely needy through hard times.
Jackie Baillie told MSPs that Dumbarton Credit Union and Vale of Leven Credit Union did a ‘fantastic job’ of encouraging saving and promoting a responsible approach to lending money.
However Ms Baillie warned that more support was required from the Scottish Government if credit unions were to provide an alternative to the dangerous seductions of the high-interest short term loans offered by payday loan companies.
Jackie Baillie says: ‘I was pleased the Scottish Government launched the ’12 Days of Debtmas’ campaign in response to Scottish Labour’s call for wealth warnings to promote alternatives to rip-off payday loans.
‘However we could be doing so much more to promote responsible, and cheaper, lenders like Dumbarton Credit Union and the Vale of Leven Credit Union.
‘Shops which offer expensive short-term loans are popping up in high streets all over Scotland. There are already five such companies in Dumbarton, Alexandria and Helensburgh. They charge eye-watering rates of interest, in some cases it’s APR of 3000% pulling people into a spiral of debt that is very difficult to escape.
‘At a time when faith in our banking system is at an all-time low, we have an opportunity to promote our local credit unions as a community-based alternative to lending and saving.
‘The SNP government should put its money where its mouth is and invest in promoting credit unions and in the short term look at all options, including a guarantee fund to provide small instant loans.’
Text of Jackie Baillie’s parliamentary speech on 18th December
Jackie Baillie (Dumbarton) (Lab): I, too, congratulate John Wilson on securing the debate and on his thoughtful and considered speech. As others have pointed out, the debate follows last week’s excellent debate led by my colleague Kez Dugdale on the regulation of payday lenders. It is fair to say that Ms Dugdale has led the debtbusters campaign in Scotland to considerable effect, highlighting the scandal of payday lending with companies charging extortionate rates of interest and taking advantage of people in recouping that loan. Clearly, as far as the minister is concerned, persistence works but I encourage him not to wait quite so long before responding to Ms Dugdale’s letters, e-mails and suggestions.
In the past year, a number of payday lenders have sprung up in my local area—in fact, it is about the only growth in the high street—and they are charging a frankly outrageous annual percentage rate of almost 4000 per cent. We are facing a huge cost-of-living crisis of a kind that we have not seen for very many decades. Incomes are declining in real terms, costs have risen by more than 30 per cent in the past five years and people are in difficulty.
There are alternatives, but we need to do more to raise awareness and point people in the right direction. As a result, I very much welcome the Scottish Government’s 12 days of debtmas campaign, which highlights credit unions’ valuable role in providing access to low-interest loans. The two credit unions in my area—Dumbarton Credit Union and the Vale of Leven Credit Union—do a fantastic job. Very much rooted in their communities, credit unions are member-owned co-operatives whose aim is to develop a responsible approach to money and encourage all of us to save. With their low-interest loans, which are usually repayable over a long period, they are growing all the time. Across Scotland, there are 108 credit unions, some based on a workplace, others based on where people live, and as many as 350,000 people have joined them.
However, they have so much more potential, and that is the issue that I want to explore with the minister.
I will digress for a minute, however, and mention that in the House of Commons Gareth Thomas MP has tabled a 10-minute rule motion that seeks to create a credit union for military personnel who are increasingly turning to payday loans to get by. I hope that Scottish National Party MPs and, indeed, Conservative MPs will support that, as it is particularly important.
In my local area, we asked the council to advertise the credit union on its council tax notices, which are received by every household. It is considering that. We have also asked it to promote the super savers scheme, which gives every primary school child a credit union account with a small sum of money—£10, say—to kick off their saving habit. That, coupled with financial education that is provided by the credit union, can be a powerful tool to change habits in the next generation. A small sum of money could prevent a future spiral into debt. The Scottish Government should consider ways of promoting credit unions, perhaps on television or radio, that would support local activity at this time of year and all year round.
I recall that the previous Scottish Executive had in place a credit union development plan entitled Unlocking the Potential: An Action Plan for the Credit Union Movement in Scotland”, which was backed by considerable resources. I suspect that the current Scottish Government has also provided funding, but if we are to make a quantum difference to financial exclusion, we need to do much more to sustain credit unions.
What specific measures will the minister implement to do so? In the short term, what about providing credit unions with assistance through a loan guarantee fund to enable them to offer more instant loans? In the long term, how can we encourage community credit unions to have people from all walks of life as their members? I look forward to the minister, in the spirit of Christmas, outlining the further measures that he will implement now to support credit unions.’