Brighton Council looks to strengthen credit union services

Brighton & Hove City Council is to consider becoming a corporate member of East Sussex Credit Union (ESCU).

The move would include loaning the organisation £250k to expand its services to more of the city’s poorest residents.

The not for profit organisation currently offers affordable loans, debt management advice and savings accounts to those who are excluded from mainstream lenders for reasons associated with financial hardship such as having a poor credit rating, and seeks to reduce reliance on high cost payday lenders.

The loan would mean a larger variety of products being available to a wider range and number of individuals and would benefit an estimated 2,500 households over and above the current 3,854 Brighton and Hove residents in the ESCU membership.

The proposal will be discussed at the council’s policy and resources committee meeting on January 21.  Should it be given the go ahead, the £250k loan would be funded from reserves and be payable in full at the end of a five year and one day term.

Other councils in England that have provided subordinated loans to their local credit union include London Borough, Haringay, Islington, Worthing and Adur.

Cllr Emma Daniel, chair of the Neighbourhood, Communities & Equalities committee, who supports the proposal, said: “This administration has pledged to tackle inequalities in the city and those experiencing financial hardship are among the most disadvantaged.

“The ESCU has reached its limit in terms of the size and number of loans it can offer and with the ongoing impact of welfare and public sector funding reform the city is expecting to see more and more people facing financial vulnerability.

“By investing in the ESCU, the council would be providing an effective financial resource that is directly beneficial to the communities of Brighton and Hove.”

ESCU has provided small loans from £100 to £15,000 to people who struggle to access traditional financial services and its loan rates are much lower than doorstep lenders, typically over 200% lower APR than well-known providers.