ADUR and Worthing councils have become the first corporate members of the West Sussex Credit Union.
Councillors agreed £25,000 should be invested from each authority, in a bid to help people to access ethical, affordable lending.
In addition, Adur Homes has made a £25,000 subordinated loan to the credit union, which means the money can be ring-fenced for its tenants.
Neil Parkin, leader of Adur District Council, said: “We’re all well aware of doorstep lenders and pay day loan companies, who have charged interest rates of 5,000 per cent or more, and whose services have often been marketed to those in already difficult financial situations.
“We feel that this is wholly unacceptable, which is why we are using this investment to support those in our communities who genuinely need access to affordable, ethically managed, credit.”
The councils, the first in West Sussex to make the move, said it was ‘significant step’, directly helping to lift local families out of unmanageable debt and to increase choice in the ethical savings market.
Ray Mason, chief executive of West Sussex Credit Union, said: “This investment from Adur and Worthing councils, as well as Adur Homes, will make a dramatic difference to the number of people we’re able to help.
“While the credit union concept seems new, it is well established, tried and tested, with many successful unions operating all over the UK.
“We all feel passionate about helping individuals struggling with their finances to climb on top of the issue, and providing a way for local investment to directly benefit local people.”
Local authorities across the country are choosing to become civic social entrepreneurs, investing their money in new ways to directly benefit their communities.
The councils will be working closely with the credit union over the coming months to deliver the most mutual benefit from the corporate membership.
At the joint strategic committee, held at Adur Civic Centre on November 4, councillors expressed their support before approving the proposals.
They also requested information set out in the report, providing examples of high interest rates and irresponsible lending, be publicised by both councils.
Examples included the purchase of a 50in plasma TV. At one high street lender, payments of £12 a week would need to be paid for 156 weeks, making a total of £1,872. With the credit union, payments would be £4.41 a week over the same period, making a total of £687.
Another example was £500 home collection credit, with one provider charging interest of £1,548 over 12 months, compared with £97 charged by the credit union.
Visit the website www.westsussexcreditunion.co.uk for more information about the credit union.