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Lenders created to take down payday firms are failing

A logo sits on display in the offices of the Financial Conduct Authority (FCA) in the Canary Wharf business district in London. Photo: Chris Ratcliffe/Bloomberg for Getty Images.
A logo sits on display in the offices of the Financial Conduct Authority (FCA) in the Canary Wharf business district in London. Photo: Chris Ratcliffe/Bloomberg for Getty Images.

Credit unions went out of business at their highest rate since 2010, and customers are facing difficulty in getting affordable credit. In total, 73 unions have disappeared in the last decade.

The most recent figures from the Association of British Credit Unions (ABCUL) show that the number of credit unions between 2000 and 2017 more than halved, falling from 700 to 312.

However, despite the number of unions decreasing, membership of those that remain has increased by 250% to more than two million customers in the UK.

Lucy Russell, campaign director for the organisation Fair By Design that attempts to ensure poorer consumers do not pay more for essential services, said the lack of digital services hinders accessibility.

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“They don’t have widespread online services, it is a problem,” said Russell. “We need to build their infrastructure so they can be competitive and accessible for more digital customers, as well as serving those who are digitally excluded and want that local branch access.”

Closures of individual unions do not necessarily pose a problem for customers trying to gain access to credit.

READ MORE: Brexit concerns hit the biggest part of the UK economy

Matt Bland, head of policy at ABCUL said: “We do, unfortunately, see a number of credit unions fail each year. Typically the credit unions that do fail are very small, with a few hundred or maybe a thousand people using them.”

One limiting factor for access is that they simply do not have enough assets to offer credit to those who might need it.

Assets at British credit unions total £3.2bn ($4bn), while total UK consumer credit stands at £215bn according to Bank of England figures for the end of November 2018.

As the regulator Financial Conduct Authority is cracking down on high-interest consumer credit providers, there could be a shortfall for those needing access to credit.

Stepchange Debt Charity’s chief executive Phil Andrew said: “Credit unions and community lenders are an important and valued part of the financial landscape. However, the capacity of the existing sector to deliver the increased volume of low-cost credit that would truly replace the high-cost credit market is limited.”