Plan to pull thousands in Leeds out of debt spiral

Have your say

Leeds has the biggest credit union in the country but some want to make it bigger still in 2015. Neil Hudson reports.

When the Archbishop of Canterbury Justin Welby declared ‘war on Wonga’ in 2013, it started a national debate about personal debt and the pitfalls of high street lending. Now former Leeds MP John Battle says he wants to make 2015 the year of the credit union.

The 63-year-old, who held office as the Leeds West Labour MP for 23 years and was a vociferous supporter of the minimum wage, said he wanted to show thousands of people struggling to pay sky high interest rates that there was another way.

“I want to make 2015 the year people wake up to the reality of the credit union,” he states emphatically, adding he’s been paying into one for the last 10 years. “Credit unions are marvellous things but people just don’t know about them. I’d like this year to be the year we really push their membership and stop people taking out unaffordable, high cost loans from payday loan centres and doorstep lenders.”

The father-of-three, who is also now a grandfather, says that despite retiring as an MP, he’s never been busier. Indeed, two years ago when it looked as though his local swimming baths in Bramley might be forced to close due to council cutbacks, John was instrumental in forming a friends group, which eventually took over its running and has just celebrated its first anniversary.

Now, as National Debt Awareness Week looms (January 26-February 1) he’s focussed his attention on making local credit unions a force to be reckoned with.

In Leeds, there are two credit unions, the Leeds Credit Union, which also happens to be the largest in the UK with 35,000 members and the much smaller Bramley Credit Union.

Both offer members affordable loans, in addition to a range of other financial products, including Christmas saver accounts, a credit card which can be used in ATMs and a regular bank account.

John said: “I’d like to see the credit unions get much bigger this year. There are about 750,000 people in Leeds, with about 300,000 of those of working age and yet only 35,000 are in a credit union, which means there’s lots of space for expansion.

“The main advantage of being in a credit union is they are not going to charge you the exorbitant rates of interest you get with some of the high street lenders, which has seen a lot of people get into financial difficulty. And unlike doorstep lenders, you are not going to end up in the position of someone turning up at your door with a demand for money and a pit bull.

“Additionally, the money they make is invested back into the local community and does not go into the pockets of shareholders. It’s all regulated by the Financial Conduct Authority, so no-one is going to run off with the money.

“Credit unions have changed a lot recently, so you can now use some ATMs and they have a card facility. I’d like to see all communities in Leeds embrace the credit union, that’s the next step for us really.

“In the past many people have thought it’s just banking for the poor but it’s not, it’s an alternative form of banking which could replace the model we have now.”

Chris Smyth has been chief executive of Leeds Credit Union for the last six years and said he would love to see membership grow to 40,000 this year.

“It’s increasingly becoming an alternative, it depends how extensive someone’s banking needs are. We are not a 24 hour bank like First Direct but we are certainly increasing our products and services to be an alternative. If people have money on deposit with us, there are all sorts of ways to access it, including communicating with us over the internet.

In the US, Ireland, members of credit unions is up around the 50 per cent mark, in Ireland they are on every street corner and exist alongside big banks. In the UK just two per cent of people belong to a credit union, in Leeds that figure is about four per cent. Membership has been increasing but this is a challenge for us.

“We do agree with sentiments of Archbishop Welby. We do feel high cost lending is a serious problem, it creates tremendous debt and not just that but it has a knock-on effect for things like stress and the break-up of families and work absenteeism.”

A report by debt charity Step Change, published in 2014, claimed ‘problem debt’ cost the UK £8.3bn a year through the damage it causes to family life, mental and physical health, productivity and employment prospects and also to the welfare state, the NHS, local government and other agencies.

Leeds Credit Union has around £15m on deposit and around £10m on loan. It offers loans from £500 to £15,000 and runs a range of financial services, including a current account, Christmas saver accounts and a credit card which can be used in cash machines.

The most the credit union can charge in interest on a loan is 43 per cent but Chris says the typical APR is around 26.8 per cent, figures which are dwarfed by the interest rates offered by some high street lenders, which can be up to 5,000 per cent.

The credit union has branches in Armley, Middleton, Leeds city centre, Dewsbury Road and Seacroft and last year extended its reach to cover the Wakefield area, where there are two branches, with one branch in the city centre and another in Hemsworth. In Leeds, the credit union shops are mostly located inside council-run One Stop centres.

Chris said: “We have principles that stem from co-op movement of the 19th Century and we would like to extend our membership to bring a different type of service to people. There are the big banks on the one hand and high cost lenders on the other - we kind of sit in the middle.

“We would certainly like to see membership in Leeds rise to five per cent, which would mean growing from around 35,000 to 40,0000 members. Beyond that I see no reason why in time credit unions such as ours cannot grow to a similar scale of a medium sized building society.”