By Dave Gudgeon

Last updated 08:01, Friday, 04 July 2008

Cumbrians are currently about £3m in debt to doorstep lenders and loan sharks, it has been revealed.

About three-quarters of those borrowers live in social housing and some are paying interest rates of more than 300 per cent.

The shock figures were revealed at a special meeting of Cumbria DRAMA (debt rescue and money advice) at Rheged, near Penrith.

The partnership was created following academic research in 2005 which highlighted the level of financial exclusion in west Cumbria.

Among the indicators of financial exclusion are having no access to a bank account, poor financial literacy, high levels of debt – and a reliance on extortionate credit.

DRAMA involves all seven credit unions in the county, all the social landlords, the local authorities and the Citizens Advice Bureau. All of its activities are co-ordinated by the Derwent and Solway Housing Association.

Its ultimate aim is to create a network of sustainable credit unions across the county which can offer, among other things, low cost loans. They can prevent householders who operate solely on a cash budget falling prey to doorstep lenders and illegal loan sharks.

DRAMA has also been operating an ‘instant affordable loan’ system since last October thanks to the creation of a Growth Fund by the Government’s Department for Work & Pensions.

Credit unions only hand out loans once individuals have been saving with them for 12 to 14 weeks whereas the Growth Fund can make immediate payouts.

Among the speakers yesterday was John Cray, financial inclusion policy manager with the DWP, who urged other organisations to examine their corporate consciences and come on board. They could offer help in kind as well as cash.

The conference was told that people taking out a £500 loan over 56 weeks from a credit union would pay £32.48 interest or just over 12 per cent. An emergency loan for the same amount over the same period through DRAMA would see them paying interest of £66.03 or 25 per cent.

Through Provident, who operate door to door and quite legally, interest payable would be £340 at a rate of 183 per cent.