Short term loans scheme
A new scheme instigated by Telford & Wrekin Council will see a local credit union given a six figure grant to run an ethical short term loan scheme for residents.
The aim is to prevent the more vulnerable and needy in the community falling prey to the extortionate interest rates typically charged by payday loans companies.
Charities nationally have reported that increasing numbers of people have had problems with payday loans with a particular growth in the number of people with five or more – such loans carry an APR ranging from 1,300 per cent to 7,000 per cent.
Telford & Wrekin Council’s cabinet – which meets on 13 November – is being asked to ring fence £100,000 to be used as a grant to fund a local credit union to run the loans scheme.
It is planned that the scheme would mirror some of the benefits of the payday loans concept but at significantly lower charges.
There are currently limited affordable alternatives to payday and other short term loans, although Telford & Wrekin Council has prevented access to payday loan sites from public access computers.
However, people in Telford with limited incomes or poor credit ratings are currently unable to access fast, affordable and ethical short term loans and the scheme cabinet is being asked to approve will address that.
A council working group invited bids for the £100,000 funding earlier this year. The outcome of this is that cabinet is being asked to approve the money being given as a grant to Just Credit Union Ltd.
Just Credit Union initially offered services to the people in the Shropshire Council area but opened them up to Telford and Wrekin in 2008 and now has 1,255 active members from the borough.
Just Credit estimates over the two year life span of the £100,000 grant, they will be able to make loans to the value of £272,160. Typically loans will be for amounts between £50-£300 and payable over no longer than 52 weeks.
It is aimed to launch the loan scheme in early December 2014 with the aim of attracting borrowers who run the risk of turning to more expensive forms of lending over the Christmas period.
The council will support Just Credit by raising awareness of the loan scheme among front line staff and partners who have dealings with residents who are struggling with debt caused by high cost borrowing.