Member Article

Government urges businesses to get behind credit unions and cut down payday lending

The Economic Secretary Andrea Leadsom, has encouraged employers and voluntary sector organisations to engage with credit unions to help them provide affordable credit and responsible financial services in their communities.

Lloyds and Barclays have promised £4 million and £1 million respectively of funding for credit unions and a taskforce under the Archbishop of Canterbury has been set up.

Following the launch of the government’s call for evidence on credit unions in June, the Economic Secretary led a round-table of leading employers and third sector organisations, organised by the Chartered Institute of Payroll Professionals, to discuss how employers can use their payroll systems to allow workers to plug directly into their local credit union, without having to transfer money themselves every month.

Government actions include:

• earmarking a fund of £38 million for the Department of Work and Pensions’ Credit Union Expansion Project, which is already well underway
• modernising the existing legislation governing credit unions and lifting the cap on the maximum interest rate credit unions can charge from 2% to 3% per month to help the credit union movement grow
• legislating to require the new stronger financial regulator, the Financial Conduct Authority, to impose a cap on the total cost of payday loans

Economic secretary to the Treasury, Andrea Leadsom said: “Credit unions play a vital role in their communities, providing access to affordable credit for those who need it most.

“This government is determined to help credit unions provide these services to even more people. That is why I am today urging private sector employers and wider society to consider what more they can do to promote the use of credit unions among their employees and communities.”

Lucky Chandrasekera, Chief Executive of London Mutual Credit Union said: “Credit unions are seen as the growing local financial service providers in the UK and best able to help the most vulnerable people in our community.

“Given the right framework, technology and leadership, they are poised to provide a real alternative to payday and door step lenders for anyone looking for affordable and ethical finance.”

This was posted in Bdaily's Members' News section by Clare Burnett .