Scottish politicians urge UK Government to act over Payday Loan companies

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By a Newsnet reporter 

The UK Government is facing renewed calls to intervene in order to address the increasing concern over so called payday loan companies who offer short-term loans at astronomical rates of interest.

SNP MEP Alyn Smith has joined SNP MSP Margaret Burgess in demanding action be taken against companies some of whom charge extortionate rates of interest, at times eclipsing 4000% APR.

By a Newsnet reporter 

The UK Government is facing renewed calls to intervene in order to address the increasing concern over so called payday loan companies who offer short-term loans at astronomical rates of interest.

SNP MEP Alyn Smith has joined SNP MSP Margaret Burgess in demanding action be taken against companies some of whom charge extortionate rates of interest, at times eclipsing 4000% APR.

Last year Mr Smith wrote to the European Commission seeking their guidance on the issue, the Commission confirmed that it was the competence of each Member State to regulate these companies.

Mr Smith highlighted the plight of vulnerable Scots who he said had been targeted by some companies in the run up to Christmas.

Claiming that the loans often lead to even more debt problems and severe financial difficulties Mr Smith added:

“It is clear that some legal restrictions must be put in place in order to curb the ludicrous rates of interest.  This has already happened in many other European nations as well as 35 US States, where there is a limit on the maximum interest these companies can charge, so it is possible.

“The UK Government have consistently failed in regulating the financial markets and have done absolutely nothing to reform the system despite an almost global agreement that change must happen.  Their ignorance is now leading to misery for thousands of Scots who are turning to these
companies at this time of year.

Highlighting the lack of powers available to the Scottish Parliament to deal with the issue Mr Smith said:

“Cameron and cronies must get their act together and regulate these companies out of existence before more people face financial ruin as a result.”

Payday loans are small unsecured loans designed to help people get by until payday.  Traditional banks will not loan to them and some people find themselves falling into a spiral of debt.

The calls follow a survey by Shelter England that show one million people south of the border have used payday loan companies in the last year in order to cover mortgage payments.

Another survey by insolvency trade body R3, claimed that research showed nearly two thirds of people using payday loan companies found themselves worse off.

Over the past five years the number of credit companies offering short-term loans has increased dramatically and often see an increase in customers over the festive period, with the promise of ‘quick approval’ and access to cash ‘within minutes’.

SNP MSP for Cunninghame South Margaret Burgess is now calling for cross party support for a debate in the Scottish Parliament on the issue in January.

Ms Burgess, who was previously a director of Citizens Advice Scotland and manager of a large Citizens Advice Bureau has lodged a motion for debate in the Scottish Parliament on the issue of payday loans.

Ms Burgess said:

“At Citizens Advice all too often we’d hear from people who had turned to these companies and had trouble dealing with the repayments.  That leaves people struggling financially and emotionally.

“I can understand why many people turn to these companies to meet unexpected bills or to make the money stretch a little bit further but the lack of regulation is a real problem.

“The Scottish Parliament must speak up for those who find themselves stuck in the debt trap and I hope other parties will sign up to a debate on the issue.”