A recent announcement, by Experian, the UK’s largest credit reference agency will see credit unions being added to their panel of lenders.
Although functioning as a credit reference bureau and a way for individuals and companies to check credit scores, a large part of the business is acting as a loans broker for those looking to borrow money. Recent data from the company shows that around 25% of their customers are not eligible for mainstream loans that are offered – and credit unions may be a better fit for those with adverse credit histories, lower incomes, unemployed or on benefits.
The decision to include credit unions onto their panel comes from Experian after highlighting that around 25% of their customers are not eligible for mainstream loans. The agency has partnered with three community lenders – Manchester Credit Union, Scotwest and Scotcash and is in discussions to bring more credit union lenders onto their panel later this year.
Clive Lawson, Managing Director of Experian Consumer Services said: “The financial impact of Coronavirus is a worry for many of us and Experian is committed to supporting financial inclusion, especially during these challenging times. That’s why we are giving our customers another option if they are ineligible for credit offers from traditional providers.
“When a customer is unable to access mainstream credit from lenders, some feel as though they have no other option but to pursue other means such as payday loans or even illegal loan sharks. These products often have very high-interest rates and can be structured differently from mainstream offers, which can make it more difficult to calculate the cost of credit and increase the chances of customers spiralling into debt. This innovation with incuto to offer our customers credit options from not-for-profit community lenders provides a much-needed alternative.”
It became mandatory by the FCA in 2017 for lenders to be listed on PCWs (price comparison websites), particularly in the high-cost and payday loans sector. This was aimed to increase transparency across the industry and to give customers other options – and it was a requirement to include a link clearly back to a price comparison site on any key transaction pages.
Whilst not part of any regulatory requirement, the move by Experian to include credit unions is certainly welcomed and will no doubt appeal to a wider audience who may be declined by traditional lenders.
Dan Kettle of short term lender, Pheabs, commented: “Adding credit unions to the mix is a great decision for the large volume of people looking for loans who are only going to be declined by greater and stricter lending requirements.”
“Credit unions play an important role, helping those on low incomes and offering help by not charging any late fees or rolling up interest. It is noted though, that funding can take up to 7 days compared to the average lender who can take just a few minutes or hours.”
“In addition to credit unions, borrowers should consider lending alternatives such as salary finance, peer-to-peer lenders like Fund Ourselves and The Money Platform and also borrowing from family and friends.”