However, support from banks has been patchy. While some banks have extended their interest free overdrafts, others have increased their overdraft interest rate fees to up to 49.9% in the past month – while offering savers low interest rates of just 0.1% despite being asked to passing on the benefits of the Government’s Covid-19 stimulus package to customers.
British banking is dominated by four large banks: Barclays, Lloyds, HSBC and the Royal Bank of Scotland (RBS) provide 70% of current accounts. Even before coronavirus hit, the signs that this wasn’t working were clear. 1.7 million people don’t have access to banking of any kind. 40% households have less than £100 in savings. Household debt last year was already the worst on record and credit card debt was growing at the fastest rate since the financial crash.
However, alternatives do exist – credit unions are financial co-operatives, owned by their members and existing to support them rather than create wealth for external shareholders. They provide accessible and affordable banking, and while the high street banking sector may not be doing all they can to support communities impacted by coronavirus, the country’s credit unions certainly are.
For example, Celtic Credit Union in South Wales have opened a new branch in Port Talbot – where the larger premises allow for greater social distancing to protect staff and customers. The Serve and Protect Credit Union has members in the police, prison service and military – many of whom are serving on the frontline of this crisis, putting themselves at risk to provide essential support. The Credit Union has launched a new Wellbeing Callback Service – members who feel stressed, vulnerable or isolated can talk to a member of the team.
The Penny Post Credit Union, which provides financial services to Royal Mail workers, is processing loans quickly for members caught out by the crisis. For example, one member got stuck in Asia without sufficient medications when lockdown restrictions prevented his travel home, and they were able to process a loan for him and get the money into his account in just over an hour and a half. The 1st Class Credit Union has has been providing members with revolving credit loan facilities to help members pay any unexpected bills during the crisis, while keeping repayments low, and the Enterprise Credit Union has approved its 1000th loan since entering lockdown. Similarly, the Pennine Community Credit Union is providing low cost credit to members in need – they had processed £95,000 into members’ accounts by 9am on 24th March to ensure members, especially those who receive benefits, had access to responsible finance as soon as possible.
It is clear that when our focus shifts to how we renew our economy after the peak of the lockdown has passed, we need to rethink the way that our financial sector works. Credit unions and co-operative values demonstrate time and again that they are key to a more responsible, responsive economy.