TORBAY Council has agreed to help its most vulnerable residents avoid paying extortionate interest rates on loans.
Hundreds of thousands of pounds are owed to companies offering instant credit and pay day loans, with interest rates which can be thousands of per cent.
Now Torbay Council has agreed to support the extension of a community credit union in the Bay — Plough and Share — which offers cheaper loans as well as financial advice.
Councillors have been told that between April and December 2012, Torbay CAB dealt with 4,800 debt inquiries. So far this year it has helped clients manage almost £9million worth of debt. Of these debts, 41 per cent were consumer credit debts such as unsecured loans, overdrafts, and credit/store cards, with a further 29 per cent relating to household debts such as mortgages, secured loans, rent arrears, council tax and utilities.
A slightly larger number of inquires are coming in from Tormohun, Watcombe, Wellswood and Ellacombe.
Plough and Share operates the credit union across Devon. A third of its 3,200 members are in Torbay. The 730 Torquay members have £156,000 out on loan and £35,000 held in savings. Paignton currently has 220 members with £52,000 out on loan and £21,000 held in savings. Brixham currently has £13,000 out on loan and £1,500 in savings.
Labour Cllr Darren Cowell, who put a motion in support of credit unions at the council, said they are a much cheaper option than any alternative for people turned down for loans by high street banks, for people often forced to use loan sharks or pay day loans at punitive rates of interest.
Credit unions support their borrowers so debts don't spiral out of control. The amount of interest a credit union can apply is capped at 26 per cent per annum. One alternative company is charging 4,214 per cent.
Cllr Cowell said the council could help Plough and Share find space in Torquay and Paignton town centres. It can already be contacted through Hele's Angels, Torquay, and the Sanctuary Housing Office in Woodview Road, Paignton.
He said: "When someone goes for a loan they go through an application process with a trained volunteer who can help them with their budgeting. It's a more inclusive process than some faceless entity lending you £50 and expecting £80 back.
"It's already successful in Hele and it needs a higher profile. People will be even more desperate with all the welfare reforms and get trapped with extortionate rates charged by high street lenders.
"The credit union is not just for the poorest people, but for hard working families struggling to cope. People who are relatively prosperous can also save with the credit union, with their money protected up to a certain amount. Those savings will help to support the borrowers," he said.
He said someone borrowing £500 over a year would pay £563.57 with Plough and Share compared with £900 with one high street name and £825 with another. "That's not even on the 4,000 per cent rate," he said. "You only have to see how many have opened in our high streets to see how busy they are."