Scottish Councils could be handed more powers to limit the number of controversial pay day loan shops opening on Scotland’s high streets.
The Scottish Government has faced calls to introduce legislation even though there is now a cap of 0.8 per cent APR on the amount pay day loan firms can charge, campaigners have expressed concern about what they say are lending shops “flooding” areas that are already stricken with “deep-rooted poverty and social deprivation”.
However, Angela Constance, Scotland’s Communities, Social Security and Equalities Minister, has been urged to look at how Holyrood’s powers can be used to prevent lenders charging high APRs for their products, on top of legislation that already exists to curb pay day loan interest rates.
Scottish Labour deputy leader Alex Rowley issued a plea for “a great sense of urgency” to erode what he said was a “cycle of poverty” made worse by high levels of debt in parts of Scotland, in a letter to the Minister. Rowley said: “I am writing to ask you to have a look at the levels of debt in Scotland and to consider a review of what provision is available to people to borrow and what can be done to minimise the risks of people, particularly on lower incomes, ending up paying unacceptable levels of interest. Given that it is those in the poorest communities who are often targeted by the companies who charge the most, would you consider what powers could be made available to local authorities to restrict the availability of those lenders on local high streets? The question is what has been done or is being done to stop these kinds of organisations flooding the streets of in particular communities where there is deep-rooted poverty and social deprivation? There is a great sense of urgency in this matter, as more and more people find themselves trapped in the cycle of poverty, many of them because of the practices of payday loan companies. I hope that you agree that work on this area needs to be done and done fast, if we are to be serious about lifting people out of poverty.”
In response to Rowley, a Scottish Government spokesperson said that ministers would set out changes to planning legislation regarding payday loan stores before the end of the year. “The Scottish Government continues to be concerned by the misery which payday lenders are causing indebted individuals and families. The majority of the 12 point Action Plan on Pay Day Lending and Gambling has been delivered. This includes the introduction of Scotland’s Financial Health Service, which has already offered thousands of people guidance on debt, managing money and ethical lending. The website encourages people to seek early advice and also provides a search function to help people find nearby credit unions who may be able to offer more affordable financial products. We intend to lay changes to planning legislation regarding payday lending before Parliament by the end of the year.”
Russell Hamblin-Boone, chief executive of the Consumer Finance Association (CFA) claimed Rowley’s proposals would limit choice for customers. “The number of stores across the country is already in decline, as people choose to access credit online. Lenders are strictly regulated by the Financial Conduct Authority, which introduced a range of measures to protect consumers. We are very concerned to hear that some companies may be finding ways around the rules.”