I READ with interest the letters from Terry Smith and Matthew Laverack regarding credit unions in York.

Mr Smith makes a perfectly reasonable idea (credit unions to use doorstep collectors) but sadly one which is not feasible with the business model of any credit union. While the likes of Provident would charge an APR of 545 per cent to advance £500 over 23 weeks, a credit union is restricted by law to charge a maximum of 26.8 per cent APR. It is not difficult to see that the differential in interest paid can pay for the doorstep collectors employed by those lenders.

Mr Laverack, however, suggests that councillors should underwrite the risk of any money put into credit unions. This is akin to suggesting when we had the global crash of 2008, MPs should have underwritten the money that was pumped into the banks to keep the world’s financial system afloat.

There is a further distinctive difference. Credit unions have a social purpose in encouraging saving and providing small amounts of credit to often low-paid workers who would otherwise be susceptible to payday lenders who advertise a representative rate of 4,214 per cent APR. Bankers avoid their social purpose by failing to lend to small and medium-sized businesses thus deadening economic growth while continuing to cream off huge bonuses.

Richard Bridge, Holgate Road, York.