The Social Fund and Credit Unions

Three points on the recent storm over whether Credit Unions might manage or distribute some of the Social Fund emergency payments the government makes to people on benefits:

• The association of credit unions with the "poverty industry" is deeply damaging to the prospects of growing the CU movement; for as long as government sees us as the Poor People's Bank and assumes that we are only there to deliver banking services to the poorest in society, we will never build the capacity or the critical mass we need. CU's need to attract depositors from across the communities they serve - it is socially better, it is economically better and it provides access to a far greater skill set for volunteers to draw from.
• The CU movement needs to show some independence from government and not be seen doing its bidding or trying to implement social policy. The Growth Fund was the worst example of that imaginable - CU's handed out public money to non-members with little prospect that they would become engaged in the CU movement, with little hope of repayment (the delinquency rates on these loans are horrifying) and probably with a significant portion of the funding being spent on drugs - that is the anecdotal evidence anyway....
• The decision of ABCUL to press government to lift the upper rate of interest a CU could charge has now been shown to be a PR disaster. The Scottish League vehemently opposed this and our member credit unions continue to charge at the traditional rate of 1% per month on the reducing balance of a loan (12.6% APR). The APR figure of 27.8% which has been widely quoted in press articles has been deeply damaging to the movement as a whole as it has enabled the less well-informed of the commentariat to claim that CU's are charging the same rate as Doorstep Lenders - hardly! The rates are comparable with a credit or store card, but I imagine those ill informed commentators cannot imagine that real people in need often face an APR of 100%+ with doorstep lenders or loansharks.