It appears that half of all payday lenders have pulled out of the UK market in the last 18 months, according to news reports. The increased focus by the Financial Conduct Authority (FCA) on the business practices of payday lenders and the prospect of greater regulation is clearly having an effect. The UK's high-cost short-term credit market has been coming under relentless pressure from the media and campaigners to change its ways.Hurrah! A great victory, comrades!
*sotto voce* …but what about the people who need a…*sotto voce*
Silence! No dissent is allowed! Let them use credit unions!
While the number of payday loan providers may be declining, credit unions and community development finance institutions (CDFIs) are slowly scaling up and offering a wider range of services, such as short-term loans, at affordable prices. Barclays has announced a £1m fund for credit unions, along with a range of other measures, including helping with access to premises. Lloyds Banking Group has revealed that it will invest £1m a year in credit unions and has piloted a project in Leeds signposting appropriate customers to the Leeds City Credit Union and local money management charities.See! There’s an alternative! A glorious socialist alternative!
But wait! The usual socialist stumbling block is hit. There’s a shortage!
But the geographic reach of credit unions and CDFIs is still patchy, and many of their potential customers are not aware of their existence. Community projects such as Big Local and Community First are helping to tackle this, but it is an uphill battle.Let me guess? More of other people’s money would help?
The £38m invested in credit unions is almost the same amount as the top five payday lenders spent on advertising in 2013 (an estimated £36.3m). The financial services market is still distorted, with poorer communities offered a wealth of choice of high-cost credit providers but no choice of other types of financial services… … we need to see a massive scaling up of credit unions and CDFIs as well as encourage the main high street and new challenger banks to serve poorer communities…OK. Fine. Sink your own money into it, then.