A NEW drive to keep some of Leeds’ most vulnerable low income families out of the grips of loan sharks and predatory lenders is gathering pace - just as the festive buying frenzy does the same.
At the centre of the drive is the city’s new Your Loan Shop, which is operated by Leeds City Credit Union.
The cooperative provides affordable loans at fair rates of interest to meet everyday needs, and it is a vital part of the city’s ongoing war on high-cost lenders, who loom especially large during the financially fraught Christmas period.
A new survey published yesterday revealed that a third of Britons are borrowing money to pay for presents this Christmas, while one in five are taking on credit to pay for food.
According to the new research by the Money Advice Trust, the debt advice charity which also runs National Debtline, a “significant proportion” of families are relying on credit to get through the Christmas season, with some missing payments on household bills to cope financially.
More than a third of people surveyed had already borrowed, or plan to borrow, money to cover the cost of Christmas presents this year.
Shockingly, more than one in five have already borrowed, or plan to borrow, to put FOOD on the Christmas table – equating to an estimated 10.4 million people.
Of these, more than three quarters are borrowing on credit cards.
But for those who can’t even rely on the relative ‘luxury’ of the plastic, the bright lure of payday loans - often available within minutes - can prove too hard to resist.
That is where the Credit Union, and the Your Loan Shop, come in.
The Roundhay Road shop opened in August and, with its big branding and friendly, non-corporate feel, it is playing the unscrupulous lenders - aesthetically at least - at their own game.
The shop sits on a major inner city thoroughfare which is bordered by several areas considered among the city’s most deprived - Gipton, Harehills, Chapeltown and Burmantofts - but also in an area with a high concentration of payday loan shops, cash converters, etc.
The shop saw 600 new clients in just three months, and has already approved small loans totalling £150,000.
Chris Smyth, chief executive of the credit union, believes the shop may be benefitting from a ”halo effect” from some of the big-banner advertising of high street, high-cost lenders, and he has no issue with that at all.
While the businesses themselves are doing something “we don’t like and are not comfortable with” he says, he admits that “we are in truth following something of their model” when it comes to methods of reaching out.
Mr Smyth estimates that one in very five people in the city has been directly or indirectly affected by high cost lenders.
“We help bankers, solicitors, council employees, and right to the other end of the scale,” he says.
The YEP reported earlier this year that Leeds is slowly starting to win its war with loan sharks, illegal lenders and payday loan providers.
It is estimated that around 60,000 people in the city may have been forced into taking out high-cost loans at some point.
But membership of the city’s credit unions has swelled to an unprecedented 35,000 people in recent years - and it is continuing to grow by 400 a month.
Lending through the credit unions was up by 25 per cent last Christmas, and it is estimated that borrowers saved £650,000 by choosing this route.
The Your Loan Shop has been launched in partnership with Leeds City Council. It is championed by council leader Keith Wakefield, who said the shop was a “key part of the chain of services” that the city offers to its most vulnerable residents.
“It’s in our interests to get people onto credit unions,” he said.
Leeds City Credit Union was established in 1987.
As well as the Your Loan Shop, it has six branches in the city, a main city centre outlet and smaller facilities in five of the council’s one stop centres.
It is estimated that about three per cent of the population of Leeds have used credit unions. The aim is to raise that number to five per cent.
The credit union offers small loans at affordable rates to people who might be considered ‘high risk’ by traditional lenders. Its typical APR is 26 per cent - high cost lenders, by comparison, can offer eye-watering rates of up to 5,000 per cent APR.
To find out more about affordable loans visit: www.yourloanshop.com
For more free finance and debt advice, visit the council’s Money Information Centre website at www.leedsmic.org.uk.