Retailers' Credit Union To Defy Payday Lenders
Some of Britain's biggest high street names, including New Look and Next, are forming a credit union that will offer staff an alternative to the sky-high interest rates charged by payday lenders.
Sky News has learnt that RetailCure, which has also received backing from entrepreneurs such as Rymans owner Theo Paphitis, is drawing up plans to launch later this year.
The new venture has received start-up funding of £1m and will eventually be accessible to the 4.8 million people who work directly in retail or in related sectors of the economy, half of whom earn less than £8 an hour.
It will be chaired by John Lovering, a veteran retailer who has led buyouts of companies including Debenhams, Homebase and Somerfield.
Mr Lovering is also chairman of the Retail Trust, an industry charity which has been working on plans for the new credit union for some time.
Speaking to Sky News, he said: "The industry feels that we have to find a way of providing a source of cheap, reliable credit for our people.
"The three million in retail and the nearly five million in the wider industry do have a need for low-cost, value-for-money, short-term borrowing facilities, and that's what we as an industry are trying to provide."
Booker and Matalan have also agreed to support RetailCure, while John Lewis Partnership and Wm Morrison have been approached and are expected to provide financial assistance.
The launch of RetailCure comes amid a still-intense political debate about the business model employed by payday lenders, which charge interest rates that work out at more than 5,000% on an annual basis.
The high street chains' credit union will charge interest on a sliding scale from roughly 7% to nearly 28% depending upon the borrower's credit history.
Mr Lovering expects the average loan request to be lower than £5,000, and believes that RetailCure could ultimately become Britain's biggest credit union.
"We think we can build a loan-book of £50m and attract 50,000 members relatively quickly," he said.
Assuming it receives regulatory approval, savers who deposit funds with RetailCure will be protected by the same Government guarantee as that which covers high street banks.
Labour MP Stella Creasy, who has campaigned against payday loans, told Sky News: "Anything that helps people access affordable credit as opposed to some of the legal loan sharks you see on your high streets - the payday lenders and the logbook loan companies - is a welcome move."
Earlier this week, the Church of England unveiled a pilot scheme through which a new credit union network will be piloted in three of its dioceses.
That project is being led by Sir Hector Sants, the former boss of the City watchdog, which since April has had oversight of consumer credit providers such as payday lenders.
Last year, the Archbishop of Canterbury, Dr Justin Welby, said he had told the then boss of Wonga that he wanted to "compete (the company) out of existence".
The remarks sparked acute embarrassment for the Archbishop, however, when it emerged that the Church of England's pension fund was among the investors in one of Wonga's financial backers.
In its annual report this week, the Church Commissioners said they had yet to dispose of the holding because doing so would crystallise a significant loss for its pension fund.
Some industry stakeholders were sceptical about the prospects for RetailCure.
Russell Hamblin-Boone, chief executive of the Consumer Finance Association, which represents short-term lenders, said greater choice was welcome but warned that it faced significant uncertainties.
"What this body will have to do is make sure it complies with very stringent regulations that are applied to financial services.
"I would ask questions around what is going to be the collection policy, what happens if somebody leaves the retailers business still owing a debt, how are you going to collect that?"
RetailCure hopes to launch formally in November.