The final item of business is a members’ business debate on motion S4M-11049, in the name of Christine Grahame, on Capital Credit Union outpost Penicuik. The debate will be concluded without any question being put.
Motion debated,
That the Parliament commends Capital Credit Union on launching an outpost at Penicuik North Kirk; understands that this will be a pilot for a possible wider extension of the credit union across Midlothian and features the active involvement of the Church of Scotland and the Scottish Episcopalian Church through the partnership, Penicuik Churches Working Together; notes that the credit union facility is staffed by church volunteers with support from Capital Credit Union; wishes it well in its endeavours to encourage responsible saving and borrowing and in allowing people to access ethical products at fair rates of interest without having to turn to pay day lenders; thanks the church for providing the free premises, the Lothian Presbytery for contributing office furniture and all of the volunteers and everyone else involved in what it sees as this exciting and much needed project, and hopes to see other initiatives of this sort coming into being across Scotland.
17:05
A much calmer Christine Grahame and a calmer debate than the last one.
On 26 September, I attended the launch of a Capital Credit Union outpost at Penicuik North kirk. That sounds like something from the wild west, but it is actually a partnership with Capital Credit Union in Edinburgh and churches of other local denominations, such as St Mungo’s and St James the Less. Volunteers, trained by Capital Credit Union, help run the service. Some of them made it through the storms and are in the public gallery tonight.
The church provides the premises free of charge, and Lothian presbytery provides the furniture. I am a member of Capital Credit Union—I should have declared that sooner. As members know, because they are all well informed, credit unions are financial co-operatives that provide savings, loans and a range of services to their members. Importantly, they are non-profit making. They are owned and controlled by the members—a bit like the old Trustee Savings Bank, which I think you might remember, Presiding Officer. Each member has one vote, and volunteer directors are elected from the membership, by the membership and for the membership.
Membership of a credit union is based on a common bond. That can be working for a particular employer or in a particular industry, or simply living or working in a specified geographical area, which could be as small as a village or as large as several local authority areas—or, in this case, the size of Penicuik.
Credit unions encourage all their members to save. That word, “save”, is key. Members can pay in directly by payroll deduction or through benefit direct accounts; through retail payment networks such as PayPoint and Payzone; by standing order or direct debit; or in cash at local offices and collection points. They offer an affordable source of credit to their members. “Affordable” is another key word—we are not talking about loans that lead the borrower into personal financial crisis. In fact, credit unions are more responsible than the so-called responsible banks were or indeed are.
Credit unions are prepared to make small-sum and shorter-term loans that most banks and building societies do not offer. However, interest on credit union loans is always much lower than that charged by doorstep and payday lenders.
For example, home credit companies such as Provident openly advertise typical annual percentage rates of 399.7 per cent, while payday lenders such as Wonga can charge rates in the order of 5,853 per cent. Loan sharks can charge even more outrageous interest rates. Incidentally, credit unions’ interest rates for savers are not that bad, either.
At the North kirk, there is already a food bank, and the outpost is a further practical church initiative that is introducing people to the old-fashioned way of saving and borrowing responsibly. As I said before, the credit union is a not-for-profit organisation. The loans that are offered are on the basis of a proper look at what the person can afford, so that they do not get into trouble.
The initiative follows a special commission that was undertaken by the Church of Scotland in 2012, which called on the Kirk, society and our Governments to take action on four priorities: reducing inequality; ending poverty; ensuring sustainability; and promoting mutuality. The report encouraged the use of credit unions, commenting that, with the new breed of pawn shops, payday loans, cheque cashing and instant internet loans, it is easy for the unwary to fall into a debt trap.
In 2014, the Church of Scotland’s General Assembly took up that theme and encouraged all members of the church to save and to borrow with a credit union. I would encourage all members in the chamber, and people outside the chamber, to do that, too. That is what Penicuik, through its churches, is doing.
The facility is open from 10 am to 12 noon on Mondays, and 2 pm to 4 pm on Fridays. The target was to sign up two new members to Capital Credit Union each week. In the first few weeks of operation, with a team of trained volunteers, the credit union has signed up 28 new members, thereby exceeding that target. Each of those people will have opened a savings account with Capital Credit Union. In addition, a loan has been taken out in that time.
I quote the Rev Ruth Halley of the North kirk:
“Joining a credit union is a great way to support ethical banking. Credit unions are responsible lenders and offer affordable credit. They also encourage us to save as well as borrow and are ‘not for profit’. ... This can be of real benefit to all the people of Penicuik, and the more people who join the greater that benefit will be. I’ve already joined, and I hope that everyone who lives or works here will join too.”
I encourage all members who are not yet members of a credit union to join one. The interest on savings is quite good and it is an ethical way to save that allows others to borrow responsibly. Better still, credit unions provide mutual funding for people who may not be able to access banks otherwise.
I congratulate the churches on their involvement. I am not a member of a church—I am an atheist—but I like to see churches putting their money where their mouth is. I commend the churches of Penicuik, which are doing just that. They are carrying out practical work in the community—first, through the food banks and, now, through the Capital Credit Union outpost—to encourage people in the community and to help those who may need a bit more help. I wish the pilot well and look forward to local credit union facilities being extended, following in Penicuik’s footsteps.
17:11
This time of year is a time for celebration, for being with family and friends and for reflecting on the year gone by. It is also a time of increasing pressure to give gifts, to spend and to splash out on treats for those we care about. For many, it is a time of stress as parents buckle under the weight of expectation and advertising to spend; for some, this time of year is no different from the rest of the year—a constant struggle to make ends meet. It is often the time when many people in Scotland turn to payday lenders and short-term solutions. That is why Christine Grahame’s motion is welcome.
Credit unions provide savings accounts and a range of services including a safe, reliable alternative to payday loans and their accompanying sky-high interest rates, which my colleague Kezia Dugdale has done much to highlight over recent years. I am sure that everyone in the chamber commends that work, which has helped to make a greater number of people aware not only of the danger of loan sharks but of the existence of alternatives. The piloting and possible expansion of Capital Credit Union through the work of dedicated church volunteers is a very welcome development indeed. The more awareness that the Parliament can raise of that alternative, the better.
As Christine Grahame outlined, the volunteers at Penicuik North kirk give their time to run a satellite office for Capital Credit Union, where local people can find out about saving and borrowing with Capital Credit Union and can apply to join. The credit union office is staffed by volunteers from Penicuik North kirk, St Mungo’s and St James the Less, all of whom have been fully trained by Capital Credit Union in a joint endeavour to offer fair, affordable savings and loans to church members and others in the community.
Traditionally, credit unions have been small, non-profit-making financial organisations that have been set up by members with something in common to benefit their community. That common factor may be living in the same town, working in the same industry or belonging to a particular trade union. The local North Edinburgh Credit Union serves the north Edinburgh part of my constituency, but Capital Credit Union serves my constituents and people in a much wider area. The advantage of a larger credit union such as Capital is that it is more able to provide the kind of loans that are an alternative to payday loans. For example, it can give fast-track loans of £500 to anyone who joins it at a rate of interest that is considerably less than is charged for even the capped payday loans that have been announced recently. The most extensive credit union loan will still incur eight times less interest than payday loans at their new cap. I hope that the cap will be reduced considerably because, although it was a step forward, there is a long way to go.
As I have said, to be part of a credit union, members generally need to share a common bond. That common bond means that those who pay in also have a say in the running of the credit union, so it is genuinely rooted in shared interest and community. It is part of the philosophy of credit unions that everyone pays a small amount in, to save for a rainy day, and everyone within the community gets the safety net they need in the full knowledge that they have a major role in the functioning of the union.
The more people who start to use credit unions, the better. Credit unions continue to call for measures to boost membership, and I would welcome any policies that the Government can bring forward to promote credit union membership. For example, the credit unions say that they would like the public sector to encourage all employees to join a credit union, and there are various ways in which it could do that. Another demand from the credit union movement is that there should be a guaranteed loan fund for the purposes of lending by credit unions. Again, I would welcome the minister’s comments on that. It would be a form of preventative spend, in that it would stop people getting into the kinds of difficulty that they get into with payday loans.
Credit unions are a great institution that I have admired for a long time and, at a time of immense distrust of the integrity of those who guide our financial systems, they offer an ethical breath of fresh air.
17:15
I, too, record my thanks to Christine Grahame for raising the issue of credit unions. It has been raised in Parliament on previous occasions, but it is right that we discuss it again, not just because of the time of year, to which Malcolm Chisholm referred, but because credit unions are important in themselves, and we should continue to drive home that message, to ensure that the Government responds by continuing its commitment to them.
It is important for us to recall the general and the specific matters to which the debate gives rise. As well as paying tribute to the local credit union that Christine Grahame spoke about, those who work in it and those who act as volunteers, we should remember the specific issue that Christine Grahame and Malcolm Chisholm commented on.
I should declare that I am a member of a credit union—Castle Credit Union, which was originally Craigmillar Credit Union. It now serves an enlarged area, which means that it has benefited from greater capital and a larger membership.
We owe thanks to two groups. First, we need to thank those who are directly involved in credit unions and those who volunteer. Specific mention has been made of the churches. In debates in the chamber, members sometimes take a sceptical view of those members of the faith communities who volunteer. I share Christine Grahame’s view that, regardless of whether people who volunteer are from the secular part of our society or are among those who profess a faith, we should welcome those who give and those who contribute. In my constituency and elsewhere, we face another swathe of church closures, and we might well rue the day that the opportunities that were offered in various communities, not simply by the church building but by the church hall and those who participated in activities in it, are lost.
I want to comment on two particular aspects. I turn first to the good work that is done by credit unions, which often operate in areas in which there are no banking opportunities. Craigmillar is an example of such an area. The community is smaller than it once was. There used to be a TSB branch there, but now there are no banking opportunities. The same is true of many peripheral areas—and some urban areas—in Scotland. The banks are going through a raft of closures. That is understandable, given that people such as me do internet banking, but the issue of access to funds and to banks in many areas of deprivation remains a significant problem.
It appears to me that the use of credit unions offers a solution. The outreach work that they do, to which Christine Grahame and Malcolm Chisholm testified, is seen not only in Craigmillar but in places such as Gilmerton in my constituency, where access to finance is also difficult. Credit unions offer people who are in deprivation, who face challenges and who cannot get access to finance an opportunity to deal with austerity, but they are not simply for those in deprived areas and the less well-off members of our society. They offer opportunities that I and other members take up.
In particular, I would like to put on record the good work that is done by the Scottish Police Credit Union. In doing so, I will touch on the point that Malcolm Chisholm made: credit unions are there for all. People who join the Police Service of Scotland are encouraged to join the Police Credit Union. That can be of benefit to them. Young men and women may find themselves being posted to police stations that are distant from where they live. They may have to buy a car, and it may be that the best way to obtain that vehicle and to be able to carry out their work would be through the Police Credit Union.
Credit unions provide an opportunity to address austerity, but they should also be used as a matter of course. No matter whether we are talking about MSPs, people in the public sector or indeed people in the private sector, credit unions have so much to offer not just in Penicuik but throughout Scotland.
17:20
I, too, commend Capital Credit Union for starting an outpost at Penicuik North kirk, and I welcome Ms Grahame’s motion, particularly as I am, for once, agreeing with her.
Access to credit at reasonable rates can be important for many people, and the responsible provision of it can make such a difference. That is particularly true of credit unions, which have the local community’s interests at heart. At the risk of repeating what everyone else has said, we have all heard the horror stories about payday lenders, the huge rates they can charge and how people can get trapped. Credit unions send out a much-needed message that those lenders are not the only option. I hope we can all applaud the efforts of the Church of Scotland and the Episcopalian Church in working to make this outpost a reality.
With more than 300,000 members nationwide, credit unions such as that represented at the new branch in Penicuik North kirk play an important role in Scotland. That large figure translates into about one in every 20 Scots. As we have heard, there are credit unions such as North Edinburgh Credit Union, the First Scottish University Credit Union, the credit union in Penicuik and many others right across the country, and their importance is considerably magnified when we compare them with payday lenders. Such companies, which have been known to charge an annual percentage rate of more than 5,000 per cent, have led many people, unwittingly and unwillingly, into financial difficulties that are difficult to get out of. Indeed, citizens advice bureaux in Scotland have reported that every week they deal with more than 100 cases involving payday loans.
A crucial point is that it is far better and easier to deal with financial difficulties by avoiding escalating debt in the first place. However, the solution is not simply to ban loans but to make them more affordable. An outright ban on payday lenders would not be a useful intervention, and a more practical and sustainable solution would be to overcome them competitively by undercutting them on interest rates. Thankfully, that is where the credit unions have stepped in by encouraging people to save—which, as has already been mentioned, is the key word.
Restricted by law to lend at a maximum of 26.8 per cent APR, credit unions certainly undercut payday lenders by a considerable and significant margin and are, in fact, beating them at their own game. Although that is good news for members of the public, such an option does not come easily, and it relies on volunteers to do a lot of the work. As a result, we must all recognise the effort and time that various people invest in credit unions, both in Penicuik North kirk and in the wider sector. The new branch of the credit union in Penicuik will be located rent free in Penicuik North kirk, will be furnished by the Lothian presbytery and will be staffed by volunteers from Penicuik North kirk, St Mungo’s and St James the Less, all of whom have been fully trained by Capital Credit Union.
That shows just how much has been given freely to ensure that the credit union operates, and all involved should be loudly applauded. Without that kind of voluntary contribution, credit unions would not be able to offer the relatively low rates of interest that they can at the moment. Given that the ability to undercut payday lenders on interest rates is central to our outmanoeuvring them, we cannot overstate the importance of the voluntary contributors.
I think that there is a lesson to be learned when faced with certain operators—in this case, payday lenders—who do not act in consumers’ best interests. The solution might lie not in introducing severe Government legislation against them, but in putting in place private or third sector initiatives to outcompete them. As a result, demand and supply can be moved to responsible suppliers, instead of such lending being outlawed altogether.
Accordingly, I hope that the launch of a Capital Credit Union outpost at Penicuik North kirk can be commended by us all. The huge amount of time and effort put in by local volunteers will enable the outpost to compete with payday lenders and, in so doing, will provide a great service to the local community. This example demonstrates how communities can work together to deliver local services, and it highlights how the problems caused by questionable lenders can be overcome by outcompeting instead of outlawing them.
17:24
I, too, thank Christine Grahame for securing this members’ business debate, which is, as other members have said, very timely not only with regard to the credit union movement itself but because of the time of year and the fact that we are coming up to Christmas. I will expand on that point later.
We almost forget the role that the Church of Scotland played at the general assembly in 2010, when it established the special commission on the purposes of economic activity. That resulted in the report that was produced in 2012. The commission was chaired by Professor Charles Munn, who clearly identified that the church could play a role in promoting greater economic activity in communities.
We can clearly see some of Professor Munn’s suggestions in the motion. He quite clearly outlined that the church had resources in people and facilities that it should offer to credit unions and other community organisations to ensure that they could promote the credit union movement and greater economic activity in the areas in which they had a presence. I am glad that church members and the churches in the Penicuik area have taken that on board and to heart, and I hope that we will see that type of development throughout Scotland and that other churches will get involved and carry out the good work that was first suggested by Professor Munn.
I want to allude to some examples. We talk about payday lenders and online payday lenders with 278 per cent APR. Christine Grahame mentioned Wonga, which promotes a loan at 1,538 per cent APR. However, we forget high street stores that offer goods at double their value.
I took two examples this afternoon. If a person buys a PlayStation 4 in an average store, they will get it for £400, but in a particular high street store it is £636. It claims an APR of 94.7 per cent. The total price that is paid for something that could be bought for £400 is £1,300. That is three times more than if it was bought with cash.
An Xbox 1 console with a game is approximately £370. The same high street store sells it for £738.87. With 94.7 per cent APR, the total payable is £1,508.
That is the type of thing that is happening in many communities throughout Scotland. Parents are under pressure to buy the latest games or consoles, and people are feeding off that deprivation and those individuals and they are making profits out of that.
We have to bear in mind that the issue for all of us is that we want a fairer society. Credit unions are not the poor man’s banks, as many have described them. Kenny MacAskill quite rightly said that some of the most successful credit unions are ones that can draw down the salaried staff who will contribute to them and which offer mortgages to their members. We need to ensure that credit unions have a balance in those who are involved and that they can get people actively involved across society.
My only dissenting note is that, although I welcome Capital Credit Union’s move out to peripheral areas and expansion, I wish that it would speak to the existing credit unions in those areas to which it is expanding. Two weeks ago, I received an email from a credit union that had more or less raised a concern that Capital Credit Union, because of its size and savings, can undercut some of the smaller existing credit unions. I make the plea that it should speak to the existing credit unions in an area. If there are no existing credit unions there, it should by all means go in and establish a credit union outpost, but it should consult, discuss matters with and involve any existing credit unions in areas.
Finally, I welcome the work that the Scottish Government has done in the past, particularly in the 12 days of debtmas campaign at this time last year, and I look forward to the work that it will take forward in the future to promote and enhance the role of credit unions in society.
17:29
I, too, thank Christine Grahame for securing this debate on this credit union issue, which I think we all agree is very important. I also express my thanks and congratulations to everyone who has invested their time and energy in making the new Capital Credit Union outpost in Penicuik a reality.
I am delighted to see how engaged the church is with the credit union movement and that the two are working together to help their communities. I am sure that I speak for everyone in the chamber when I say that I hope that the Penicuik pilot will be a resounding success and that we see similar partnerships rolled out elsewhere.
All across the country, there are people interested in working together to bring ethical, affordable financial services and products into the heart of their communities. We should all do that we can to bring people together and support them in their endeavours to do that. That need not just be by churches—any organisation or group with space and a willing group of volunteers could develop similar partnerships.
The Scottish Government’s support for the Penicuik pilot forms part of our wider work to promote credit unions. The work recognises the significant contribution that credit unions make to Scotland’s financial landscape, providing financial services and products to a wide range of customers. Those customers are often the most financially vulnerable or excluded, although Malcolm Chisholm, Kenny MacAskill and John Wilson all made the point that credit unions are not just exclusively for those on low incomes; they absolutely understand the need to have people from across society in their membership.
It is very often the people on low incomes—and they are seeing no increase to that income—who are bearing the brunt of changes to the welfare system. Credit unions can play a role there, too. Some credit unions are delivering new services to help those affected by welfare changes. I welcome that.
In my area, I am aware that the 1st Alliance (Ayrshire) Credit Union has a relationship with the six housing associations in the area. Those in the housing associations are being encouraged to join their local credit union. That is a good move.
As part of Scottish Government’s support, we have been working with the private and public sector to raise awareness of the benefits of credit union membership. We have heard from all the speakers about the benefits of being a credit union member. In particular, we have been encouraging the take-up of payroll deduction schemes, which Malcolm Chisholm mentioned, including for Scottish Government and Scottish Parliament employees.
We have also been working closely with schools to improve financial education and to promote credit unions as a viable means to save. There has been significant activity to promote credit unions, such as last year’s 12 days of debtmas campaign by the Accountant in Bankruptcy, which John Wilson mentioned.
I am sure that we all share concern at the reports of spiralling personal debt as a result of high-cost loans. The Scottish Government does not have the power to regulate in that area. I would very much like to see that change, but until that day comes I assure members that we are doing everything we can to bring about the changes that we can make, so far as devolved legislation allows.
The Scottish Government has been pressing for a cap on payday loans. When I was preparing for the debate, I remembered that my first members’ business debate in the chamber as a back bencher in March 2012 was about payday loans. I called for a cap to the interest rates for payday loans. A cap will be introduced in January 2015, but that action is too little, too late. I agree with Malcolm Chisholm: the proposed cap is too high. Fergus Ewing, the Minister for Business, Energy and Tourism, will continue to urge the financial service to look at that again.
We are pleased that the payday lending industry is being subjected to greater regulation, but more work is needed.
Linked to our work to promote credit unions, last week my colleague Fergus Ewing launched the new financial health service for Scotland website. The website aims to help people build their financial resilience and prevent repeated debt problems. It brings together information on issues including debt advice, employability and access to ethical and affordable lending, such as that provided by credit unions. The aim is to provide a central hub, allowing people to find in one place trustworthy organisations to help them with their financial queries or difficulties.
To discuss what more we can do to promote credit unions, the Scottish Government has set up a credit union working group, chaired by Fergus Ewing. The group is looking at ways to ensure that we have a secure, thriving and sustainable credit union sector in Scotland; that credit unions have a wide and varied customer base; and that the financially vulnerable are supported by having alternatives to high-cost lending.
Looking back again to the debate in 2012, I said at that time that I would like to see credit unions being the first resort in the high street for saving and affordable borrowing. That is what we should be aiming for as the first port of call.
The working group’s first meeting was held on 9 October and it will meet again early in the new year. It has already highlighted a range of areas that we can take forward, such as encouraging employers to link with credit unions to encourage save-as-you-earn schemes. I think that all members who spoke in the debate asked for that.
This debate has highlighted the vital role that credit unions can and do play. The Penicuik outpost is a great example that shows the desire within our communities for people to come together, work together and make a difference to people and their communities.
Meeting closed at 17:35.Previous
Decision Time