Bank branch closures affecting poorest the most, credit union warns

A spate of bank branch closures will leave thousands potentially vulnerable to predatory loan sharks and payday lenders, according to a credit union.

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Pollok Credit Union (PCU) says 21 high-street bank branches in Glasgow will shut up shop, denying access to finance for those with no mobile or online banking provision.

The union, which has seen an increase in its members, has warned high streets without face-to-face finance options will hit the poorest and most vulnerable the hardest.

PCU operations director Jim Garrity said: "While high-street banks are shutting up shop because many customers are embracing digital services, many people still want or need face-to-face interaction.

"Staff in our branches are already seeing an increase in membership this year as these branch closures take hold.

"With so many closures already confirmed for later in the year, we expect to see even greater demand for face-to-face financial advice and services.

"Many people simply don't have access to online or mobile banking, or need financial products and services explained in a clear and personal way.

"Many mainstream banks are neglecting the accessibility requirements of their customers."

The organisation, which was established in 1993 and has loaned £40 million since then, is committed to expanding its branch network to provide a lifeline service for the community.

It also says it can help anyone and has fair terms for those who might be tempted to go to unreputable firms for help.

Mr Garrity added: "The departure from banking in person is creating a vacuum, particularly in our poorest communities, where many people are being left behind to potentially fall into the hands of loan sharks.

"Providing access to finance and fair lending terms can help anybody, but especially those who are vulnerable, employed on low incomes or in receipt of benefits.

"It's crucial that these people don't fall victim to the doorstep and payday lenders that plague our communities."

Most common causes of debt
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Most common causes of debt

There are some very common reasons for building up problem debts. Here we reveal seven of the most common, and what you can do if you face them.

Unemployment or illness that means one or more of the household’s earners are unable to work will bring a profound change in family finances, and according to the Money Advice Service is the most common reason for getting into problem debt.

If your circumstances change, therefore, you need to immediately address your family finances, and put everything on a minimum spend lockdown. You should also look into the benefits and tax credits that are available sooner rather than later, to try to close the gap.

If you are on the kind of contract that means varying hours, it can be incredibly difficult to work out what you can afford to spend - making it the second most common reason for getting into debt - according to the Debt Support Trust.

Rather than swinging through the extremes from week to week, the best approach is to establish a budget that will work in the leanest of months, so you don't find yourself getting used to the months when you work more hours.

According to Citizens Advice, trying to service too much debt is the third most common reason for getting into difficulties. The TUC found that those with problem debts spend 40% of their income on debt repayments.

If you are in this position, you officially need some help with your debt problems. If you continue to rob Peter to pay Paul, you will end up owing more and more, so you need to take stock and talk to a debt charity about all your options.

The double-whammy of the legal bills combined with the incredible cost of establishing two separate households is enough to make divorce or separation the fourth most common reason for going into debt - according to the Debt Support Trust.

There's no easy solution, but if you are going through this, it can be helpful to talk through your financial situation with someone you trust or a debt charity, who can help you balance a stretched budget.

Problem debts aren’t necessarily caused by a sudden shock to the system. According to the Money Advice Service, 20% of their clients are simply trying to live on an unsustainably low income.

If you are in this category, it’s important to seek help on the benefits and tax credits you may be able to receive. It’s not always easy to navigate the system, but charities like StepChange have experts on the benefits system who can talk you through what’s available.

The combination of rising costs and stagnating wages over the last few years has meant increasingly people saw their monthly wage cover less and less of their monthly outgoings. This position has started to ease more recently, but has left many people far worse off than before the financial crisis. The Money Advice Trust said a combination of this and unexpected costs was responsible for almost one in ten problem debts.

If you consistently spend more than you are expecting, it's well worth keeping a spending diary. That way you can establish the real cost of living, and start to identify where you can cut costs.

The Money Advice Service says it commonly deals with individuals who have struggled to get to grips with budgeting and debts, and have got into debt because they don’t have the skills and knowledge to manage their money effectively.


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