Credit Unions membership rises to record levels

Membership of Credit Unions has risen to an all-time high, with these financial institutions lending more money than ever as the cost-of-living crisis worsens.

The Bank of England’s latest data shows that over 1.9 million people in the UK are now members of a Credit Union.

Borrowing from Credit Unions is particularly common in Northern Ireland with 615,543 members – a third (32%) of the UK’s total.

As well as growing membership in the UK, Credit Unions are also loaning record sums to members with total borrowing reaching £1.74 billion at the end of 2021. This surpasses the pre-pandemic peak of £1.70 billion.

Credit Unions, as co-operative societies, are often able to offer smaller, shorter-term loans that can be difficult for borrowers to find through other institutions. Other specialist lenders can also charge very high interest rates with the majority of Credit Union loans made well below the maximum interest rate, an APR cap of 42.6% set by the government.

In March, a report from the Centre for Social Justice (CSJ) –  Swimming with Sharks2– revealed 1.08 million people are victims of loan sharks and called for reform to the Credit Union Act 1979, including the creation of a new Credit Union Mergers Fund. Freedom Finance, a supporter of the CSJ’s Debt Policy unit, supports the call for reform and a broadening of the types of credit available as the cost-of-living crisis continues to worsen and following the withdrawal of many short-term credit providers.

Commenting on the findings, Brian Brodie, Chief Executive of Freedom Finance and CSJ Debt Policy Advisory Board member, said the Bank’s latest figures were evidence of both the growing strain on household finances and the difficulty many people face in obtaining affordable credit.”

“The rising membership and loan volumes with Credit Unions in the UK demonstrate that more and more people are looking for affordable credit products as cost pressures rise. With many short-term credit providers withdrawing from the market, Credit Unions now fulfil a vital role in serving people left behind by mainstream lenders.”

“The CSJ’s recent report on loan sharks identified Credit Unions as a vital financial lifeboat for many people while also helping to build people’s financial resilience by linking loans with savings. Raising awareness of Credit Unions will be an important first step to give those struggling to penetrate the credit market another option to explore.”

“Credit Unions are only part of the solution. A strong choice of reputable providers of short-term loans and other credit will be essential to helping people through the current cost-crunch. A failure from the lending industry to provide this support will only drive more people towards insidious, illegal loan sharks.”