Unite, the UK’s largest trade union, recently launched a unique credit union service that enables its members to access credit without having to turn to payday lenders and pay their exorbitant rates.
Unite said the recent move sends a clear message to payday lenders who attempt to profit from “ordinary people’s financial hardship.”
Since Len McCluskey, general secretary of Unite, has vowed to keep the union’s members “out of the clutches of parasitic lenders,” the move is not surprising to many.
The new service will not be a separate credit union. Instead, it will be a tool that members can use to link up with existing and carefully vetted credit unions that are already well-established in an individual’s region.
Unite members throughout England, Wales, and Scotland will be able to use the service, which will offer low cost borrowing and instant access savings accounts.
According to Unite, an individual borrowing £1,000 over a one-year period can save nearly £685 over using a payday lender. Payday loans, however, are only taken out for a week or two, not one year.
The launch comes after Unite’s research found its members have seen a £129 per month reduction in their disposable income since May of this year.
The research also found that the union’s members borrow an average of £660 per month just to pay the bills, which is three times more than the amount borrowed the previous year.
“We are determined to wipe out rip-off payday lenders and ensure that they can’t make profits by exploiting victims of the financial downturn. Unite’s new credit union service ensures our memebrs can access finance without fear and helps keep them out of the clutches of parasitic lenders,” McCluskey stated.
He continued, “While the government stands on the sidelines and allows the quiet crisis to intensify, Unite is taking firm action; fighting for better wages and conditions in the workplace, while offering members a new credit union service that puts them and their families first. This is a clear embodiment of Unite’s values.”
The government sees credit unions as a possible answer to a growing payday lending crisis, in which millions of Britons are relying on unscrupulous payday lenders when they run short on money.
Labour leader Ed Miliband has issued a vow to impose an added tax on payday loan companies in order to provide credit unions with more lendable cash.