Yesterday (Wednesday, 21st June), Joel James MS, questioned the Minister for Social Justice on how credit unions support families across South Wales Central.
Credit Unions are not-for-profit organisations that are savings and loan providers. Whilst they hold many similarities to commercial banks, one of the main differences is that credit unions are member-owned and serve specific communities or regions. For instance, Wales has 15 credit unions with approximately 80,000 members. The main credit unions within South Wales Central include Cardiff and Vale Credit Union, Dragonsavers and Smartmoney Community Bank.
In his question to Jane Hutt MS, Joel highlighted the staggering interest rates people are forced to pay for loans with a credit union. Cardiff and Vale Credit Union, for example, have interest rates between 40.2-41.2% for some of their loans (including Family Loans), which is massively above the market average. The story is not too dissimilar for other credit unions. Smartmoney Community Bank in the Cynon Valley has an interest rate of 42.6% for a personal loan, while Dragonsavers has the lowest rate of 26.8%.
One of Joel’s concerns and reasons for raising this matter in the Chamber is that the rising cost of living is increasing economic hardship for many, potentially increasing the number requiring financial help. They should not be forced to pay scandalous interest rates which, are considerably higher than rates from a bank or building society or use their child benefit to pay the interest on these loans.
In the Chamber Joel said.
However you look at this Minister, it’s wrong for a family that is struggling and needs money for school uniforms to pay 41.2% interest, which is an interest rate within the region of the infamous payday loan companies.
Speaking afterwards, Joel stated:
Credit Unions have a place in society and can be a real lifeline to those that are struggling. I wanted to ensure the Minister was aware of the scandalous interest rates people are having to pay which in fact, often go against the projected ethos of the credit union.
These high-interest rates are punishing people for being poor and it's simply not right.
You can watch Joel's question to the Minister for Social Justice in full on his Facebook Page.