Glasgow council is to thwart the rise of payday lending in the city by opening credit union accounts for young people.
From the beginning of the next school year, every new secondary school pupil will receive £10 in a community credit union account as part of a move to reduce the culture of debt by educating teenagers about money management.
Councillors had discovered that around 100,000 Glaswegians were regularly turning towards high-cost loans to make ends meet, with poorer residents borrowing a total of £57 million last year.
Glasgow council's initiative to open credit union accounts for its students is one of a number of measures designed to reduce the stranglehold that lenders have upon the city.
The council will also refrain from leasing its property to payday lenders, and will continue to press the English and Scottish parliaments to do more to counteract the social consequences of high-cost lending.
"I think we all suspected that the use of these loans would be relatively high in Glasgow, but the figures are startling”, said Glasgow City Treasurer, Paul Rooney.
The Office of Fair Trading has recently warned 50 lenders to straighten their practice or face sanctions.
But Councillor Rooney doesn’t think this goes far enough, and called for an urgent revamp in market regulation.
"There is also an urgent need to reform and limit the use of Continuous Payment Authorities, which can allow a lender to raid their customers' bank accounts whenever they choose, for as much as they like," he said.
Credit Unions
Earlier this year, the Government unveiled a £38 million pot for the Association of British Credit Unions (ABCUL) to help the not-for-profit institutions to establish themselves as a substantial alternative to payday lenders (read more).
ABCUL reported last month that 31 unions had signed up to the first trench of funding for the project, which should double credit union membership to two million over the next five years (read more).
Glasgow council’s move will add up to 6,000 new users every autumn.
Estimates suggest that if the targets in credit union outreach are met, the reduction in payday lending will allow over a million hard-pressed consumers to save a collective total of £1 billion in interest payments by 2019.
Keith McDonald
Which4U Editor
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