Alternatives to the controversial short term loans companies have been urged by the Minister for Local Government, Carl Sargeant, as they are able to offer the same sort of stop gap service without the predatory huge interest rates that are typical of the short term loan industry.
Specifically, Mr Sargeant has been advocating the credit unions for those who are experiencing cash flow problems and believes that the benefits of credit unions have been overlooked in the rush to take out short term loans.
The 22 credit unions have a combined asset potential in excess of ₤25 million and, in Wales alone, have been able to help out 9,000 people who were unable to secure a short term loan in any other way, since 2009.
Mr Sargeant said that credit unions were designed to help provide ethically based credit and would continue to support the Welsh government’s commitment to combat pockets of deep rooted poverty and financial exclusion, wherever it existed in the Welsh community.
Mr Sargeant went on to say that there had been a worrying increase in the number of people in Wales, as elsewhere in the U.K., turning to the high street instant cash lenders for high interest loans to tide them over until they could cope with their cash flow problems.
He went on to say that there were many people whose income was under severe pressure and they were struggling to cope with their credit commitments.
Recent research by the Beaufort Association indicated that few people were aware of the existence of credit unions and their role in personal finance compared to the number who were familiar with pawnbrokers, doorstep lenders and short term loans companies.
Mr Sargeant said that the Welsh government would continue to support the increasing membership of credit unions in the public sector so that people could pay for loans and save using the credit unions rather than resort to instant cash loans services. Credit unions allow affordable ways to make loans like permit payroll deductions.
The Minister, while outlining the role that credit unions should be playing in the financial life of the Welsh community, said that their promotion should go hand in hand with the encouragement of more financial accountability and capability.