Credit Unions Are Ethical Alternative to Illegal Money Lending Proves New Research

Friday 26 January 2024

Fair4All Finance has recently published new research looking at the experiences of victims of illegal moneylenders in Great Britain. This self-reported victim study focussed mainly on those who have limited access to mainstream credit services and therefore end up in a financially vulnerable position. For those desperately needing credit, it is often commonplace within communities that informal and illegal moneylenders are approached for small sums of credit as a means to an end.

Often, these borrowers are aware that their lenders are not acting legally but find themselves with a lack of alternative options. The research from Fair4All found that mainstream credit refusal (such as from banks or building societies) was a key triggering factor for the survey respondents who used illegal moneylenders. This is consistent with other findings that those who obtained credit through illegal lenders typically had higher credit application refusals than the UK average.

Unfortunately for these financially excluded individuals, their knowledge of, or engagement with community finance organisations like credit unions was low. The report highlights that as the subprime lending market has shrunk, illegal lending has started to prey on this in-demand market.

However, credit unions are the organisations perfectly placed to fulfil the credit needs of all-income individuals but may be even more vital for those who have fewer credit access options elsewhere. The report notes that credit union lending in Great Britain rose between 2013 and 2022 from £640m to £1.3bn which is a promising sign the sector are reaching many more people.

The report mentioned that some barriers for people using credit unions were due to the lack of public exposure and understanding of credit unions and in some cases; experiencing difficulty accessing their money. However, these are key areas the sector works tirelessly to improve so more people have visibility of credit unions and the ease of service during the credit union journey is as frictionless as possible.

Commenting on the latest research, ABCUL CEO, Robert Kelly said: “There are more credit union members in GB than has ever been recorded & total value of credit union loans in GB increased by 5.8% this year. Many credit unions are embracing digital transformation and on-demand customer service which is attracting younger members. People need CUs as an alternative to high-cost credit more than ever and we at ABCUL will continue to champion our great sector.”

To read the full report please visit this page, and find a credit union you can join here.