DAVID Barry in last week’s Observer letters claimed that the Credit Union’s rate of interest on loans is “a wholly unreasonable amount ... in this era when interest rates are generally lower than they have been for decades”. This assertion requires comment.
The average loan made by the Credit Union is around £500.
Our interest rate is two per cent a month on the reducing balance which equates to 26.8 per cent APR. This is our main source of income.
Banks are prepared to lend such small amounts only in the form of overdrafts; the average rate of interest on overdrafts is around 19 per cent. Those in desperate need often do not qualify for bank accounts let alone overdrafts so they have to choose between legal lenders charging between 272 per cent (e.g. Provident) and over 4,000 per cent (e.g. Wonga) or illegal lenders who charge far more.
Even though much of the Credit Union’s work is done by unpaid volunteers, we still need professional expertise to meet our legal obligations as well as to provide our members with a high quality service. We do not receive funding from the council, but a number of housing associations and other local bodies recognise the value of the work we do by providing grants to supplement our income.
If David Barry can offer constructive ideas for reducing our interest rates but increasing our income, we would love to hear from him.
president of Hastings and Rother Credit Union