The Archbishop of Canterbury has recently sounded off about the iniquities of payday lenders such as Wonga and how keen he is to see Credit Unions grow to take their place.
So what is a Credit Union and what is it about them that makes them worthy of support from local communities and businesses?
A Credit Union by definition is a not-for- profit body and most are run largely or entirely by volunteers. There are no external shareholders: savers in the Credit Union also own the business, and their savings are safe because Credit Unions are monitored by the Bank of England and savings up to £85,000 guaranteed. Most importantly, Credit Unions are run for the benefit of the community they serve, which is usually a local area, so any money you save there is recycled in loans to your neighbours, helping to support the local economy.
What about costs? Well, in contrast to payday lenders who charge astronomical interest rates – over 5000% per annum in the case of Wonga – credit unions are restricted by law in the interest they charge. Most charge 2% per month on smaller loans (less on larger ones) and there are no hidden fees or charges, no penalties if you pay back early and generally no nonsense!
Credit Unions don’t borrow in the markets and all their funds come from savers. They usually ask people to establish a bit of a savings track record before offering any loans but this might be relaxed if employers agree to allow repayments to be directly taken from the payroll. Usually savers pay back a little more than is needed to repay the loan and they often get a pleasant surprise when their loan is paid off – they have built up some savings, almost by accident!
And why would you save in a Credit Union? Usually they don’t offer interest as such but will pay a dividend – voted by the members – at the end of the year if funds allow. The way things are at the moment, the dividends are quite attractive compared to savings account interest. But you probably don’t save there for maximum returns – just fair returns, to support your local community, and to give you a chance to borrow as and when you need to.
The local Credit Union for Hounslow Borough is called Thamesbank. Most of the board are based in Brentford or around Hounslow Borough (though we also serve Richmond and some other places, we’re really a Hounslow business). Give our administrators a call on 020 8756 3865, visit our website www.thamesbank.org or arrange to drop into one of our board meetings at The Docking Station in Brentford.
Having lived in Chiswick for many years I'm now happily settled in Brentford. I work as CEO of a not-for-profit company but that's coming to an end soon and I have to decide what's next! Around the Borough...