UK Bill Help

With the continued crackdown on payday lenders across the UK, the credit unions in Scotland are making more of an effort to step in an offer additional services to consumers. They are reaching out to young people and other borrowers that are seeking access to lower interest loans.

The watchdog FCA continues to crackdown on high priced lenders such as Wonga, which is creating opportunities for many local credit unions. They are putting new regulations into place and limiting the fees these payday lenders can charge. They are also requiring them to be clear in how much it may cost the Scottish consumer in interest and fees if they were to borrow from them.

Not only is the payday industry going through changes, but the use of personal credit is now up around 20 per cent over the last few years. This is of course because the economy is stronger than during the financial crisis, but it still shows that families across Scotland want to borrow money for any number of reasons. But unfortunately about one half of the money being issued is just being used to pay down other debts.

Another issuing leading to increased demand and opportunities for the unions are the closure of other banks. During 2014 there were 470 branches closed of other high street lenders. Between the challenges faced by payday lenders and these other closures, the environment is actually becoming less competitive and presenting more opportunities for growth.

There has already been some progress made. In Glasgow, one in four residents that meet age and other requirements are already members of a credit union. But the industry thinks that there are even more opportunities for them.

What the credit unions in Scotland are offering to former payday customers

One aim is to try to get more people that are over the age of 18 to join a credit union so that they can take on a loan at a lower interest rate. The reason being is if they do join, surveys show that they will borrow money from the lender as many as 17 more times than older people. So the earlier that someone signs up for one of these credit unions in Scotland, the more times they will seek money from it. This is good for the borrower (as the interest rates are lower) and also good for the lender.

Another challenge faced by many is the excessive debts that people have. One third of Scottish consumers would not be able to come up with £2000 in am emergency. So if people have some unexpected bills, such as travel, families would not be able to raise the money as they are already too far in debts. Also, about 50% of new borrowing is to pay other creditors. These are serious financial challenges.

Credit unions can help them address this. They will hold financial literacy and budgeting sessions. Or the person can take out a loan, at a lower interest rate, to consolidate the other debts they have. There are many services offered by credit unions to people of all ages.

For more information, the staff at the unions can provide free advice on these and other possible options. There are dozens of sites located across Scotland that residents can contact.