Liverpool City Council has awarded £1 million to a consortium of seven Credit Unions to help more than 20,000 families and small businesses in financial crisis.
The aim is to prevent people taking out unaffordable credit at extortionate interest rates, running the risk of falling prey to illegal loan sharks.
It is known that some companies offer loans with rates of up to 16,000 percent – driving people even further into poverty.
It is estimated that over a three year period the scheme will:
• Support 23,214 individuals
• Assist 620 companies and 40 emerging businesses
• Lever in £2.15 million of additional investment
• Safeguard140 private sector jobs
It is estimated that the £1 million investment will lead to around £3 million of money being lent. This is because the Credit Unions will be able to recycle the money once loans start to be repaid. A total of 12,557 loans are expected to be made.
Deputy Mayor, Councillor Paul Brant, said: “This is a pioneering initiative which will help and support the most vulnerable in our community who are being hit by a triple whammy of rising unemployment, increased costs for food and fuel and cuts in welfare benefits.
“The banks have also toughened up their lending criteria and this means many people and small businesses are unable to get affordable credit.
“All of this means that the temptation to go to a loan shark or pay day lender is higher than ever, and people are increasingly resorting to them out of desperation.
“We want to provide a support route for vulnerable people to help them out of crisis and get their finances back on an even keel.
“I am delighted that seven of the city’s Credit Unions have come together to put together a bid for this funding.
“They are based in the heart of communities and so are well placed to provide funds and advice to those who are most in need.”
“They are going to be making a massive difference to people’s lives and will prevent some on the breadline from going under.”
The seven Credit Unions are:
• Riverside Credit Union
• Enterprise Credit Union
• Knowsley Mutual Credit Union
• Partners Credit Union
• Lodge Lane Credit Union
• Central Liverpool Credit Union
• Norris Green Credit Union
David Buttle, Chair of the Merseyside Chapter of Credit Unions, said: “We are pleased to be working with Liverpool City Council on this initiative.
“These are difficult times and we are finding that people who have never, ever needed to borrow money before are having to do so because their personal circumstances have changed, for example through loss of employment.
“This is a real boost for the Credit Union sector in the city and we will be able to reinvest the money we get back in repayments into making further loans.
Research carried out by the regional illegal Money Lending Team – which Liverpool Trading Standards works with – has found:
• Illegal moneylenders are widespread and operate in areas that have a high proportion of rented accommodation and target the most vulnerable members of society
• Moneylenders vary from those who lend £10 over a few days and demand £12 on repayment to those who provide substantial loans to those looking to set up businesses
• The majority of people using moneylenders are in receipt of income support or benefits and are introduced through word of mouth
• Moneylenders resort to intimidation and violence in order to secure payment. Other common traits include adding indiscriminate charges, targeting single mothers and introducing payment through sexual favours
• Moneylenders often use victims of money lending to assist them with maintaining their criminal lifestyle and anonymity, for example illegal money lenders’ vehicles are often registered at a clients’ address
• There is also anecdotal evidence which suggests that illegal moneylenders have an impact on the wider community in which they operate with victims resorting to petty crime to enable them to meet payments