Loan sharks and community banks

Everyone is faced with an unexpected expense at some time or another, it might be replacing a broken fridge, paying an energy bill, repairing the car, buying new school uniforms or having to travel somewhere in an emergency.

Not all of us have savings to call upon and it is easy to fall into the trap of maxing out expensive credit cards or payday loans, where interest repayments can lead to crippling debt. And with up to a third of the UK population without a bank account, there are few other options.

That’s where community banks can help. Credit unions, another name for community banks, are owned by their members and run on their behalf.

They provide affordable loans for people who are unable to get credit elsewhere to prevent them from going to payday loan companies or loan sharks. Members open savings accounts and, provided they meet loan criteria, can take out loans which are repaid monthly.

Two credit unions working in Wiltshire are Acorn Community Bank, which covers Swindon and Wiltshire, and the Great Western Credit Union, which operates in Somerset and Bath, as well as Swindon and Wiltshire.

Acorn now has 10,000 members and last year loaned more than £2.3 million to its members. It has regular savings plans to help put money aside for school uniforms and Christmas and often rewards regular savers.

CEO Clive Henly says: “A third of the population of this country don't have full access to a bank,” said Mr Henly. “So it's very easy for people to go to a high interest lender or at worst a loan shark, and we want to be there for them so they have a reliable financial partner to look to.”

Credit unions are fully legal and regulated by the Financial Conduct Authority, which means your money is safe and secure.

Acorn Community Bank works with England’s Illegal Money Lending Team to report loan sharks who prey on people in desperate financial circumstances.

The term loan shark can apply to anyone who lends money informally. It could even be someone at work who overhears a conversation about money worries and offers to lend it. They do so with no formal agreement about how much will be repaid and some can use intimidation or violence to get back what they say they are owed.

They may even take passports, driving licences or benefit cards as security against the loan.

Find out how to spot a loan shark in this short film, and discover more about the warning signs, how you can help yourself – or someone else – if you’re worried about a loan shark at the Stop Loan Sharks website.

If you are worried about a loan you've had from someone you can call Stop Loan Sharks' 24 free hour helpline on 0300 555 2222.

Find out more about the services offered by Acorn Community Bank here or Great Western Credit Union here.