Mr Lyonette made his comments after two high profile cases involving loan sharks came to court in Newcastle and Manchester.
At the Manchester hearing, the judge imposed a five-year prison sentence on John Kiely who, the court heard, had charged his victims interest of up to 2,437 per cent a year.
And at Newcastle Crown Court, Robert Reynolds, was given a 51-week suspended sentence for harassment after he forced a neighbour to repay almost £90,000 on an initial loan of £500.
In a statement to the News, the ABCUL chief said a great deal of distress and huge sums of money could have been avoided if the loan sharks’ victims had approached a credit union
Said Mr Lyonette: “Most of us need to access credit at some point and some people may feel they are forced to go down the route of borrowing from a loan shark because they can’t borrow from mainstream lenders.
“The two cases in Manchester and County Durham, where loan sharks charged over 2,000 per cent in interest and then used intimidation and blackmail on their victims, show how out of hand these things can become.”
He added: “Credit unions have a vital role to play, especially in today’s difficult economic times. They provide a safe place for savings and access to affordable credit. They welcome all members in the communities and workplaces they serve, not just those on higher incomes.
“Credit unions are authorised and regulated by the Financial Services Authority and you will not pay more than two per cent on the reducing balance (26.8 per cent) and many credit union loans cost no more than one per cent a month on the reducing balance (APR 12.7 per cent). Borrowers only pay interest for the amount of time they’ve had the money so a credit union really is one of the best options.”
Mr Lyonette said that many of ABCUL’s 331 member credit unions are seeing a large increase in new members and savings as people recognise the value of local mutual alternatives to financial services providers.
He said governments have supported credit unions over the years in a number of ways and the recent publication of a Legislative Reform Order (LRO) is particularly welcome as it will allow credit unions to be accessible to more people and allow them to deliver a wider range of services.
Join the Conversation