SOUTH Lakeland has become the last area in Cumbria to set up a credit union for residents. GILES BROWN reports on what it could mean for you.

TODAY adverts for so-called payday loans are almost as ubiquitous as those for online gambling.

Everywhere you look online or on television someone seems to be exhorting you to borrow money.

Now a dedicated group of South Lakeland volunteers have taken action to give people an alternative to banks, payday loans and - at the extreme end of the spectrum - unauthorised “loan sharks”.

Last week the South Lakeland Credit Union was approved by the Prudential Regulation Authority with the intention of opening for business in October.

“The idea is that it is a community bank, so local people are investing with saving with us and when they need to borrow they are borrowing at a reasonable rate of interest,” said Stuart Pate, chair of the SLCU.

Mr Pate, who first became involved with the project through his former job as Head of Community at Cumbria County Council, said it was “in the business of helping people avoid falling into the hands of doorstep lenders and other organisations”.

“We have all heard stories of people who have borrowed £500 and had to pay back £3,000,” he said.

“The cost of living in our area is pretty high and for lots of people it’s a relatively low wage area and most people need to fund a car to get around. It is about giving people an affordable alternative to doorstep lenders.”

The credit union will offer interest rates of between one per cent and three per cent and Mr Pate said it would not be a “soft touch” as a lender.

“We are aiming to be cash free, not give free cash,” he said.

“We have got to be responsible in the way we lend money to people and how we lend people’s money and we were fortunate in being able to recruit some people with retail banking experience and loan book experience who will be able to help us make sound decisions.”

The credit union, which 1,000 people have pledged to join, will be internet based, although South Lakeland Housing is letting it use a small office in the Bridge Mills Business Centre, at Stramongate.

Mr Pate said they also planned to run drop-in sessions for people in Kendal, as well as Windermere, Ulverston and Grange.

About 20 volunteers will be involved in running the credit union and the drop-in sessions, as well as responding to telephone and online queries.

The cost of running the credit union each year is expected to be £50,000.

South Lakeland District Council and Cumbria County Council have both put £50,000 towards the union, with Kendal Town Council pledging £9,000 and local charities about another £14,000.

One of those who will be putting his money into the credit union is SLDC councillor David Evans, who will also sit on the board.

“It is an ethical place to put your money and all the money will be invested into the local area,” he said.

“It is also democratically run by local people and it is a virtuous circle that encourages people to save and avoids them getting dragged into the clutches of payday lenders and unlicensed lenders.”

News of South Lakeland’s credit union was also welcomed by the district’s Citizens Advice Bureau.

“We would want to work with them about how we can let our clients know more about them and how we can make contact with some of their clients if they identify they need help,” said Karen Evans, bureau manager of South Lakes Citizens Advice Bureau.

People who came to the bureau were often experiencing financial problems, which were often linked to other factors in their lives, she said.

Both organisations and the people involved with them could benefit from sharing information, she said.

“Part of the work we do when we offer money advice is that we look at people’s income and their outgoings and look at alternatives like different ways of saving and it is an option we can give our clients.”

PANEL - What is a credit union?

Credit unions are co-operatives that accept deposits and offer low-interest loans, savings and sometimes bank accounts

People who save or borrow through them must have a common bond such as living in the same area, having the same employer, attending the same place of worship or working in the same profession.

Credit unions are not run for profit, the money is used to reward members or improve services rather than paying shareholders.