Croydon Credit Union: a co-operative alternative to loan sharks

By - Monday 30th April, 2018

Croydon is taking action against loan sharks. How can people who need to borrow money do so fairly and safely?

In July 2017, a woman was arrested in Woodside on suspicion of illegal money lending and money laundering. In December, a suspected loan shark was arrested in Sanderstead. The raids were undertaken by the England Illegal Money Lending Team (IMLT), in partnership with Croydon Trading Standards and the police.

Councillor Hamida Ali, Croydon Council’s Cabinet Member for Communities, Safety and Justice, said:

“Vulnerable people will use the illegitimate services of a loan shark as a last resort. They are unaware of the extortionate interest rates they charge and the dangers of getting involved with these criminals. Illegal money lending causes great misery to people once they get caught up in the cycle. It can lead to harassment, intimidation and threats, and it’s known that these unscrupulous lenders take borrowers’ personal items as security and extort payments by other means.”

Up to July 2017, Illegal Money Lending Teams across the country had secured more than 378 prosecutions for illegal money lending and related activity, leading to nearly 325 years’ worth of custodial sentences. They have written off £71.9 million worth of illegal debt and helped over 26,500 people.

It’s vital to help people to find less expensive ways to borrow money

It is not just the illegal and legal loan sharks who take advantage of charging high interest rates. Many more people resort to borrowing from the Wonga-style legal loan companies that charge over £1,000 APR and advertise on TV. The problems that this creates were discussed by Aishah Mehmood in the Croydon Citizen on 8th May 2013.

In 2016, the Croydon Opportunity and Fairness Commission recommended in its final report that campaigns against loan sharking would be helpful. In June 2017, Croydon Voluntary Action promoted the Stop Loan Shark Community Funding scheme, giving grants of up to £5,000 for charities, community and voluntary groups, schools, statutory agencies and local residents for community projects that contribute to raising the awareness of the dangers of using loan sharks, prevent crime and disorder and publicise the Stop Loan Sharks message, promote the work of the Illegal Money Lending Team (IMLT) in communities and encourage reporting of loan sharks. One funded project is with ASKI (Advice Support Knowledge Information) based in Brigstock Road, working with artist Karen Barnett to raise awareness among older men and women.

Credit unions are mutuals – owned and controlled by their members

Such initiatives are important but the main challenge is to help people to find less expensive ways to borrow money. That is where credit unions come in.

They enable people to save and borrow money at reasonable rates and avoid becoming victims of illegal money lenders and being ripped off by legal loan companies and high street banks. They are co-operative and community benefit societies – that is, they are mutuals – owned and controlled by their members. The members of their governance boards are elected by the membership at annual general meetings (AGMs).

The Croydon Union held its AGM in March. It has 4,490 members with combined savings of £2.69m and loans totalling £1.88m. This year, it plans to encourage existing members to open junior savings accounts, and build more links with schools and colleges. At the AGM there was discussion about improving its promotional activity to reach more people, and how members could assist with this especially at community events.

The Croydon Credit Union’s work must continue, whatever the outcome of the May election

Credit Unions are part of the co-operative movement. Its recent national conference had 1,000 delegates. Up until the Second World War, Britain had a different form of mutual loan society: the Friends of Labour and Workingmen’s Loan Societies. For a wide range of reasons, these were in rapid decline by the end of the 1960s. For more information, you can listen to the podcast of my talk on the subject at the National Archives. Credit unions which had been developed in the Caribbean and Ireland became the alternative model for mutual saving and borrowing.

Many people see credit unions as only for the poor. But for a lot of people, being short of money is often temporary. Many unions are based in work places where many people are well paid. Of course credit unions have a role in contributing to the alleviation of poverty, particularly that aggravated by legal and illegal loan sharks. By strengthening people’s finances and reducing the outflow of interest, they help to keep more money in the local community and therefore contribute to supporting local economies. The London Capital Credit Union estimates that over £109m worth of individual and community benefit will result from its activities over the next five years.

Croydon Council supports the union, including promoting it through its pioneering Gateway service and its Managing Debt information sheet. That must continue regardless of the outcome of the local election.

Sean Creighton

Sean Creighton

A former employee of and freelance project worker with community and voluntary organisations, Sean is active with Croydon Assembly and with the Planning and Transport Committee of the Love Norbury group of residents associations. He is Chair of the Norbury Community Land Trust. He is a historian of Croydon and South-West London, British black society, social action and the labour movement. He coordinates the Samuel Coleridge-Taylor and Croydon Radical History networks. He runs blog sites covering Croydon, Norbury and history events, issues and news. He runs a small scale publishing imprint called History & Social Action Publications. He gives talks on a range of history topics and leads history walks.

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