Can credit unions really put pay-day loan companies out of business (even with the church’s help)?

I am apparently not alone in being appalled at the interest rates charged by pay-day loan companies like Wonga.com. The Archbishop of Canterbury has said the Church could do more to help non-profit lenders to compete with such firms. The Most Reverend Justin Welby wants to see skills of members of his congregation, as well as Church premises, used to assist the advance of credit unions. I’m sure many people, not just Christians, will applaud the sentiment but can such a scheme be successful?

So what are credit unions? They are simply financial co-operatives, owned by the people that use them. Generally, membership of an individual credit union is restricted to those who live and work in the local area. They may also be affiliated to a workplace or organisation- so only people who work there can join – or a trade union, a religious group (hence the Archbishop’s comments) or a housing association.

First and foremost they are a ‘savings club’ and members are encouraged, to save rather than borrow. They can pay the money in at local offices, some newsagents, collection points, directly from wages, or through a standing order or direct debit. Like other financial services these savings are protected, up to £85,000 if the credit union were to go bust.

Credit unions can lend money to members, but the amount they lend does vary. Some will only lend up to £1,000, but some of the bigger ones may offer larger loans or even mortgages. They are set up to offer loans at affordable rates, so can only charge a maximum of 2% a month (or 26.8% APR which may still be more than some credit cards). That means a £500 loan with a credit union repaid over six months will cost no more than £36 in interest.

So how does that compare with a pay-day loan company? Some of the differences are obvious: there is no membership requirement for a pay-day loan; there is no facility to save with them; and interest rates are poles apart – a loan of just £125 for 45 days with wonga.com (i.e just one quarter of the credit union maximum example) incurs interest of over £64!

Lending money however isn’t just about the interest rates you set. Any loan involves risk and in order to assess that risk you have to collect data and analyse it. The less data you collect, the more risk is involved and that’s a massive difference between credit unions and pay-day loan companies.

As a member of a credit union they will no doubt have historical data about you even before you apply for a loan including if and when you’ve saved with them and how much it was. Then, when you do apply, I have no doubt they collect even more information about you and your financial liabilities probably in a paper-based application (someone correct me here if I’m wrong). That allows them to make a considered decision about whether to lend to you and if so how much to lend over what period. I would imagine that process takes days or even weeks. The chances of fraud or a default borrower being credited under this system are not eliminated but they are very, very low.

Pay-day loan companies have hi-tech website that take basic details from you and probably only check that data against the standard credit rating agencies and possibly the voters’ register. By the very definition of their business they don’t take the time to check much else. I am told some loans are approved in less than 15 minutes and then they electronically credit your bank account for you to spend the funds instantly. That process is extremely high risk, vulnerable to both fraudulent applications and borrowers who don’t pay the money back. Whether we find it palatable or not, the money to cover fraud and defaulters has to be found and so it goes towards assessing their interest rates.

Clearly there is a need for loans at the speed at which pay-day loans companies can deliver it otherwise they wouldn’t exist. I am hugely in favour of those who need money urgently being able to get it at interest rates that are not extortionate but I just can’t see credit unions under the current system pulling it off in the required time-scales and keeping their interest rates down to 2% a month.

The government wants to extend the interest that credit unions can charge to 3% a month (42.6% APR) and hopes that, alongside £36m in extra funding, the membership of credit unions will double to two million. I hope this helps but I’m still not convinced we will see hugely successful firms like Wonga.com collapse in the near future.

The London Motor Museum

I’ve lived in London or its environs all my life and I must admit I had got to the stage where I thought I’d either heard of, or even visited, every place of interest it had to offer. On Tuesday however, thanks to an email from Amazon with the offer of a discounted entry voucher, my attention was drawn to the London Motor Museum in Hayes.

A minimum amount of research on the Internet revealed that it appeared to be quite small, possibly privately owned, “the only custom car museum in Europe” and had been founded by someone called ‘Elo’. Elo had apparently had a short career in modelling and fashion design before investing in his passion for “collecting remarkable cars which have been lovingly restored with their own individual modifications, making each vehicle truly unique”. I also found out that in October 2007 the museum had relocated to Hayes, where it now houses over 200 vehicles. So today, armed with the aforementioned Amazon voucher for an £18 Family Ticket (a generous 76% discount), I decided to go there by car with three ‘summer holiday children’ in tow.

It is difficult to write chronologically about our day without referring first to a bad point (I should stress here that it’s the only one): it is in a terrible location if you go by car! The museum has a visitors’ car park but it only holds three cars and although we got there very shortly after it opened, all three places had been taken. Most of the surrounding roads have yellow line daytime parking restrictions and those that didn’t had no spaces to park in. After driving a couple of times around the block we eventually found a space in a bay on a main road but I felt that was lucky and we could have spent a lot longer or even found nothing near enough at all. On the plus side, it is very close to Hayes and Harlington railway station and if I go there again (a very real possibility) I will definitely go by public transport.

Once we got inside the facilities are rather basic but the cafeteria and souvenir shop were clean, reasonably priced and very well stocked. There is even a small cinema that one would have guessed would be showing past episodes of Top Gear non-stop but it didn’t seem to have anything at all scheduled for today!

So what do you get when you enter the museum itself?

ImageAs promised there are plenty of customised cars like the one above. They range from those built in the 1930s through to the more modern vehicles of today. I am not a petrol-head and have no particular interest in customised cars but I can genuinely say that I found some of them to be works of art.

Image

At no time did the three children with me get bored or want to move onto the next set of vehicles any quicker than I did (a good sign). They did find the ‘no touch rule’ a little frustrating and I’m sure they would have loved to sit in many of the cars on show but having seen how lovingly each car had been cleaned and polished I can understand the staff not wanting sticky fingers on the bodywork, leather upholstery, dashboards and steering wheels.

Apart from the finished articles there was a workshop to visit too where you were invited, from behind a glass screen, to watch some of the museum’s new arrivals being renovated and/or customised.

The exhibits the children undoubtedly found the most enjoyable however were those that related to films and television. There were two Batmobiles including the one from the original 1966 Adam West television series (I have to admit I would have liked a picture of me sitting in that myself!) There was also Starsky and Hutch’s Gran Torino, a DMC Delorean (‘Back to the Future’), and a Lotus Esprit which featured in the 1977 Bond film ‘The Spy Who Loved Me’. The two below however gained the most interest from my young companions!

ImageSo apart from the parking, I’d say it is an all-round good visit for even those who despise Jeremy Clarkson! There’s a quiz that is suitable for adults and children that you can pick up in reception and tests your knowledge (or lack of it!) of cars. There are the usual things to buy to remember your visit by (t-shirts, jackets, baseball caps, and miscellaneous retro presents) and if you shop around you can get heavily discounted entry from Amazon Local (as we did) or Groupon to name just two. Mr Elo was there himself for the duration of our visit. He and his staff made us feel more than welcome.

I’d go there again and I’m 100% certain two of the three children I took (the boys) would too.

 

If you only go on one visit this summer holiday – go here!

Yesterday we went to HM Naval Base Portsmouth and while we were there we saw the remains of the Mary Rose in its brand new building. We had been once before, at least two years ago, and although it had been interesting to see such an historical artefact I was, quite frankly, a little disappointed with the setting and the information we were given. All that has changed dramatically and it’s all for the good.

Mary Rose 2

For the uninitiated, the Mary Rose was Henry VIII’s Flagship. He signed the warrant for her to be built less than a year after he came to the throne in 1509 and she sunk, just outside Portsmouth Harbour, during a battle with the French on 19th July 1545. She went down with an estimated 500 men on board and only 35 survived. The cause of the tragedy is still uncertain. One of the survivors recorded that the Mary Rose had fired the guns from one side of the ship and had turned to fire again, but dipped her open gunports below the water line and sank immediately. Other accounts suggest French gunfire; an unruly crew; a sudden gust of wind; instability; over-manning or over-gunning. Whatever the cause, the loss of the Mary Rose ensured her place in history.

The Tudors themselves tried to salvage the vessel. Barely a mile offshore, work began immediately to set her upright by pulling on her masts and positioning lifting cables. Removal of sails and rigging was achieved by 5th August but attempts to pull her upright on 8th failed, breaking the foremast and possibly the main mast too. Salvaging of accessible large objects apparently continued for several years after that.

Nearly 291 years later, on 16th June 1836, John Deane and William Edwards , diving to salvage the wreck of the Royal George at Spithead, were asked to investigate a common fishermen’s net snag. It had caught on an old timber, and close by was a gun. John Deane later sent this message:

“We beg leave to report to your Honourable Board that we have discovered by means of our diving apparatus, and picked up in the anchorage of Spithead a Copper 32 poundr Gun 12 feet long… the Inscription is, HENRICVS VIII”.

A project to salvage the Mary Rose at that time was abandoned when the costs started to outweigh the income.

As most people in this country will recall, the remains of the Mary Rose (part of the starboard side of the ship) were brought to the surface in 1982 after an astonishing feat of salvage and marine engineering. Since then the remains of the hull have been painstakingly dried out and preserved. They now sit in a brand new museum in Dock 3 of the HM Naval Base, Portsmouth. 

The new setting is a massive improvement on what we saw two years or more ago. As you enter it proudly announces that the Mary Rose was: “The King’s Ship for 34 years; Under the Sea for 437 years; Drying Out for 35 years.” (It hasn’t quite finished the process of drying out yet the anticipated end date being sometime in 2017). Mary Rose
The building has three levels mimicking the missing port side of the ship. The objects found within the remains have been placed on those levels exactly opposite where they were found. It ‘brings to life’ the original layout of the ship and its size. At each end there are numerous items recovered from the wreckage including objects and tools from the carpenter’s cabin, plates, mugs, miscellaneous personal belongings, weapons, a backgammon board and even a complete brick hearth where meat was boiled for the crew!

I have never been a huge fan of historical artefacts – my biggest problem being my own lack of imagination and ability to see it ‘as it was’. The new setting for the Mary Rose and the items they have chosen to display certainly fired my imagination and I have no hesitation in recommending it to everyone I know and their children.

More information can of course be found on the website at http://www.maryrose.org.