£38 million has been allocated for credit unions to be used for improvements to their IT systems and infrastructure by Lord Freud, the welfare reform minister, it was recently revealed.
As one of the most viable alternatives to payday advance lending, credit unions provide an important service for those who could otherwise fall through the cracks in the UK financially. In order to support these crucial financial organisations (which could result in the number of people seeking instant cash loans from payday lenders dropping), the government has announced that credit unions will be on the receiving end of as much as £38 million in order to modernise, expand, and bring in an additional 1 million members collectively.
Welfare reform minister Lord Freud made the announcement, remarking that credit unions will benefit from the additional funds, with the money going towards purchasing new infrastructure and computer systems, making it easier to help even more Brits both borrow and save. The government will also take into consideration whether they will allow credit unions to increase their monthly interest rate cap to 3 per cent, up one percentage point from their current 2 per cent cap.
In related news, recently released research findings from union Unite found that workers are turning to payday lenders more and more as their wages consistently fail to last out the month. Unite called the situation a rapidly spreading ‘debt disease’ that is infecting more and more as time goes by, with one out of eight respondents turning regularly to payday lenders.