A new credit union for Preston called ‘GuildMoney’ could soon be helping hard-up families escape the grasp of payday loan firms.
A report going before Preston Council’s cabinet tomorrow evening proposes that Blackpool Fylde and Wyre Credit Union (BFWCU) expands its services into the city.
If approved by councillors, it would see the authority invest a one-off grant of £50,000 for work such as rebranding and reprinting application forms and training council staff to be ‘credit union’ champions.
A further £100,000 of capital funds would be given to BFWCU in return for deferred shares to that amount.
Coun Matthew Brown, cabinet member for community engagement and inclusion, said: “Preston’s credit union that collapsed in 2008, despite best efforts to keep it going, wasn’t the most sustainable model. It was a city wide credit union.
“The model we’re looking at now is a ‘live and work’ credit union. If you live or work in Preston you can access it.
“By doing that we’re getting a wider range of people putting the money in it, with middle incomes supporting the people on lower incomes, who are at the mercy of pay day loaners.
“There is going to be a grant of £50,000, which will fund the expansion into Preston, which is quite manageable within the current budget.
“Despite the big reductions we face, this is one of the Labour group’s key manifesto pledges.
“The £100,000 is an investment from the capital part of the council’s budget. That is to pay for share options within the credit union, to ensure that while they are expanding we are putting support in as a city.”
The credit union aims to offer a cheaper alternative to the sky-high interest rates of quick-fix money lenders.
Payday loans offer short-term cash assistance, but at exorbitant interest rates ranging from 1,362 per cent APR to 5,853 per cent. A £400 loan can cost as much as £527 to repay after just a month.
Credit unions are non-profit services owned by their own members. They pool their savings to provide cash for loans at interest rates of between 12.7 and 26.8 per cent.
BFWCU was set up in February 2009 and now has around 3,000 members on the Fylde Coast.
The council has already blocked access to payday loan firms on all of its computers, including those used by the public at the Harris Library.
Coun Brown said the credit union was one of many initiatives the Labour group was introducing to help people struggling financially, such as the Living Wage, food co-ops and collective discounting energy schemes.
He added: “We have to do something because times are pretty dreadful for a lot of people in these times of austerity.”
It is hoped GuildMoney will be offering loans to the community by March next year.