A community bank in Middlesbrough town centre to challenge pay day lenders has been recommended by council chiefs.
A new community bank to be based in the heart of Middlesbrough is at the core of Labour mayoral candidate Cllr Dave Budd’s campaign to secure the position in May, when current Independent Mayor Ray Mallon will step down.
Deputy Mayor Cllr Budd, Executive member for finance and governance, has recommended in a report to be put before the Executive on Tuesday that Moneywise Community Banking be provided with a two-year grant totalling £85,000 to support its plans to locate to a town centre premises.
It aims to help over three years 4,000 new members, provide 1,200 training courses and issue loans amounting to just over £0.5m.
A loan from Moneywise of £300 with a typical APR of 26.7% over 12 months, the total repayable amount would be £342.79.
In comparison, the council report states the same loan from a doorstep lender (APR 272%) would cost £546 to repay; from an online instant loan (APR 1058%) it would cost £627.54 to repay; and from an illegal lender or loan shark (APR 1000%), it would cost £2,900 to repay.
Moneywise Community Banking – a not-for-profit member owned credit union – will deliver a number of financial support services including safe and easy savings; an optional Visa debit card service; low cost loans; Christmas savings club; white goods and furniture at discounted prices; free employability training; and debt and money management advice.
It was originally based in Hartlepool and now operates across Teesside, East Durham and North Yorkshire with offices in Redcar, Hartlepool and Scarborough. It is regulated by the Financial Services Authority and the Prudential Regulation Authority, which is also the case with banks.
All member savings within Moneywise are fully protected by the Financial Services Compensation Scheme so members can save safely in the knowledge that they cannot lose their savings, the report said.
Cllr Budd has said previously that a “modern, effective” credit union for Middlesbrough has to be “competitive and give an instant answer like companies such as Wonga do”.
“This has worked elsewhere and it can work in Middlesbrough. It will offer credit at fair rates and gives all Middlesbrough residents the opportunity for greater financial security.”
The report states that the two-year £85,000 grant would be funded through existing resources within the Community Support Fund.
Moneywise and Middlesbrough Council would work together to identify suitable premises.
Source – Middlesbrough Evening Gazette, 14 Jan 2015