Sterling News

Five credit unions in Derbyshire have re-branded themselves as Derbyshire Community Banks (CBD) and have launched a new website (https://www.communitybanksderbyshire.org.uk/) to promote their services to the people of the county.

Community banks will operate as not for profit financial co-operatives, offering dividends on savings and loans at lower rates than many high street lenders, and will, in their own words “offer a safe alternative to residents who may be tempted by payday loan companies or other high cost borrowing“.

As well as helping people to avoid the clutches of the pay day lenders and their usurious rates of interest, CBD will encourage people to save and to manage their money more sensibly. It is a credit to Derbyshire County Council that they have given practical help to community banks to the tune of £360K in 2013, with an additional award of £34K for the CBD to promote its new campaign.

The Derbyshire County Council cabinet member for Health and Communities, Cllr Dave Allen, recognises the importance of the role played by community banks in helping people avoid the calamity of payday lenders and other ruinously expensive forms of short term borrowing.

Cllr Dave Allen said:

Community banks can play an increasingly important role in supporting people struggling with debt and low incomes by providing access to affordable credit and by encouraging saving”.

It is also clear that education can play a huge part in helping people to understand just how rotten things will become for them once they take out a pay day or door step loan at rates of interest of hundreds of percent.

One of the significant events when we deliver Keep the Cash! to students, is the moment when they begin to really understand the difference between capital and interest, and start to work through some practical examples of the impact interest has on a loan.

It is vitally important not just to talk about interest, but to put it in the context of the underlying debt itself. To most of us that seems blindingly obvious, but to many young people, brought up in a society in which debt is a humdrum fact of every day life, it is a moment of profound revelation.

I cannot exaggerate the astonishing number of students we have worked with (from 16 years upwards) who think that when they pay the interest on a debt that the debt itself is reduced by the amount of interest they have paid.

When we show them that paying the monthly interest on a debt does not reduce that debt by one penny until they pay off some or all of the debt itself, they shake their heads in disbelief and tell us that it is not “fair”.

Well what is really not “fair” is that we do not teach young people about debt and interest, but instead ring our hands in outrage when they grow up to be adults who became the desperate clients of the modern day loan sharks.