With the recession upon us and people struggling to make ends meet one would have thought that any Government worth its salt would do everything it could to keep people out of debt and out of the hands of loan sharks. Certainly that is the rationale behind previous support for credit unions, who have built up a good reputation for working in socially and economically deprived areas and helping to keep people solvent.
However, I have discovered that because Credit Unions are now regulated by the Financial Services Authority rather than the Registrar of Friendly Societies, who had the responsibility before 2000, they are being treated like any other financial institution and are required to pay to the FSA a total of £8.5 million to help cover the cost of baling out the banks.
I am a member of LASA Credit Union and I recently attended the launch of a partnership initiative designed to help homeless people in Swansea between The Wallich, the Swansea Bond Bank, and Swansea’s LASA Credit Union. It is a good example of the work that is going on. Can anybody imagine a High Street bank helping homeless people get a roof over their heads?
I am shocked therefore that organizations such as Credit Unions, who have been set up to tackle financial exclusion are being targeted in this way to help pay off the cost to the taxpayer of rescuing insolvent banks.
When £19.7 billion of our money was paid out to rescue the greedy bankers from the consequences of their own folly, last year, my understanding was that the banks that got the money would pay the taxpayer back. Instead the FSA is levying a charge on all the organisations it controls, including each and every UK credit union so as to meet the debt.
Credit unions are not the same as banks and other High Street lenders. They are owned by their members, many of whom help to run their credit union as unpaid volunteers, offer loans at low interest, and encourage saving. Many of their members are on fixed and low incomes.
This charge is particularly hard to swallow when we remember that part of the problem was caused by inadequate regulation of the banks by the FSA. It is the responsibility of the banks who borrowed our money to repay it not community based co-operative organisations working to help alleviate hardship and poverty.
There is little time to put this right. Credit Unions have been told that if the first instalment of interest is not paid on or before 1st September then they will incur penalties. Surely Labour Ministers cannot allow that to happen.