Emma Lunn: All credit to the Church for leading the charge against dodgy lenders

Emma Lunn
Friday 30 May 2014 18:05
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Last week saw my colleague Simon Read look at the payday-loan industry. With many short-term, high-cost lenders forced out of business by a strict new regulatory regime, he feared that a new raft of unscrupulous lenders marketing themselves as an alternative to payday lenders could be just as bad – and as expensive – for consumers.

So it's good news that a new credit union scheme has been launched this week. Sir Hector Sants, the former chief executive of the Financial Services Authority, is heading up the Church Credit Champions Network.

Sir Hector said the new network could "transform the lives" of many people.

Credit unions have grown since the credit crisis and typically offer much smaller loans than those available from banks and building societies. Many charge around 1 per cent interest on a loan (an APR of 12.7 per cent) with no hidden fees. So they are significantly cheaper than payday lenders.

The church credit union scheme is part of a bigger campaign led by the Archbishop of Canterbury, Justin Welby, and will be piloted in the Southwark, Liverpool and London Church of England dioceses.

Payday lenders have long argued that their loans are intended to be repaid over a short term and fill a gap left by the high-street banks. But the Archbishop says that they can drive vulnerable people into debt, and he has pledged to put the companies that offer them out of business.

Let's hope he does just that – and that borrowers pick more ethical credit unions over some of the more suspect alternatives to payday loans.

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