Mark Whitehead 24 September 2018

Payday loans or credit unions?

A call for local authorities and other public bodies to provide payday loans to their staff seems like common sense. Councils, by virtue of their status and stability, have access to low interest rates which employees could take advantage of when they find themselves strapped for cash.

The average town hall would have no difficulty setting up a mechanism for collecting the payments through its payroll system. And the recent demise of Wonga amid a welter of accusations over its exorbitant interest rates mean there may be a gap in the market that can be filled by altogether more beneficent local authorities.

The think tank ResPublica says residents of the most deprived communities suffer from the worst credit ratings and could be those who benefit most from a council-run scheme.

Moving just 5% of the UK’s current consumer debt from the most expensive loans to salary-linked lending would reduce debt servicing costs by around £2bn, it says.

ResPublica's report has won backing from the highest levels - the UK government's minister for pensions and inclusion Guy Opperman, no less, says it 'unveils an exciting and interesting new set of ideas to lessen debt and the cost of debt' - and promises he will discuss its ideas with his ministerial colleagues.

So what's not to like?

The think tank's report Credit Emancipation: How salary-linked lending can turn around disadvantaged places, heavily promotes a company called Salary Finance, listed as a partner of ResPublica and describing itself as 'a business with a social purpose, bringing together expertise in financial technology with a desire to do good'.

Salary Finance, it transpires, is a commercial US and UK-based operation which is part of Blenheim Chalcot, a venture capital company which has backing from the Legal & General.

For all its high-sounding ideals - it proclaims it is 'on a mission to improve the lives of working people in the UK & US' - it is looking, quite rightly as a commercial business, to make a profit.

Local authorities looking to set up a salary-linked employee loan scheme could consider Salary Finance as a partner.

Or they could look to existing schemes that offer a range of services, including short-term loans, which are community-based, employee-owned and run, which are non-profit and put the welfare of their members as one of their explicit objectives.

These are the credit unions, already well-established, properly regulated and respected throughout the UK and elsewhere. They are run independently but often link with public sector bodies which run salary-linked schemes on their behalf.

Many local authorities are linked with credit unions along with the NHS and other major organisations.

ResPublica and Salary Finance make a good pitch, but it is far from clear that they can offer anything the tried-and-tested credit unions cannot. Whatever Mr Opperman says.

SIGN UP
For your free daily news bulletin
Highways jobs

Lunchtime Supervisor

Durham County Council
£24,796 pro rata
Lunchtime Supervisor  Grade 1, Point 3, £24,796 pro rata Temporary, Term time only, Part Time, 10 hours per week, 11am to 1pm, Monday - Friday Require Stanley
Recuriter: Durham County Council

School Crossing Patrol

Durham County Council
Grade 1 £4,106 (approx.) £12.85 per hour
Join our School Crossing Patrol Service! Are you punctual and reliable? Do you have good communication skills and a strong sense of community spirit? Durham
Recuriter: Durham County Council

Talent Management Officer

London Borough of Richmond upon Thames and London Borough of Wandsworth
£37,602 - £45,564
Talent Management Officer<... Wandsworth, London
Recuriter: London Borough of Richmond upon Thames and London Borough of Wandsworth

Senior Data Analyst

Oxfordshire County Council
£41711 - £45091
About Us Are you looking for an exciting challenge, then this role at Oxfordshire County Council may be precisely what you're seeking. Currently in the midst of a bold venture to support the creation of up to 100,000 new homes, re-shape infrastructure and Oxford
Recuriter: Oxfordshire County Council

Advanced Skills Worker

Essex County Council
£31931.00 - £36423.00 per annum
Advanced Skills WorkerPermanent, Full Time£31,931 to £36,423 per annumLocation
Recuriter: Essex County Council
Linkedin Banner