Gil: 'Scotland needs the powers to clamp down on payday loan sharks'

GIL Paterson has backed calls to tighten the regulations around “payday loan sharks”.

It follows the publication of a report from the UK’s largest debt advice charity that found regulations had “not fixed” the payday lending market.

The charity insisted some payday loan providers still do not engage in best practice.

Mr Paterson told how an independent Scotland – or with the devolved controls – would have clamped down on payday loans.

Last year, 11.8% of those who contacted StepChange Debt Charity from the Clydebank and Milngavie constituency had a payday loan debt, with their average payday debt balance at £885.40.

Although the charity has reported less and less people seeking help with payday debt, those who are turning to payday do not always get a fair deal.

Mr Paterson said: “Payday loans are a curse on poorer areas of my constituency and trapping the poor and working poor in financial bedlam.

“People in Clydebank and Milngavie, and across Scotland, are being snared in a cycle of repeated borrowing as their balances continue to mount – along with this comes stress, anxiety and even suicide.

“The Financial Conduct Authority has to tighten the rules to combat payday loan sharking the treatment of people in financial difficulty, for the good of our most vulnerable citizens.

“Unfortunately, the powers to regulate this industry rest with the UK Government. If it were a devolved matter, I am sure the Scottish Parliament would have taken radical action to end this injustice.”

James Stewart, StepChange Debt Charity Scotland’s public affairs officer said: “Regulation can make a significant difference to broken markets and FCA action over the last few years has gone some way to fixing the worst excesses of payday lending, but there is clearly still work to be done.
  
“It is essential that the FCA review of the payday lending cap is broad enough to fix areas of consumer detriment and poor lending practices. There is also a clear and immediate need for the Government to examine more affordable forms of borrowing for financially vulnerable people, who are often left with nowhere else to turn in their hour of need.”

ENDS

Notes to editors
Payday lending is covered by the provisions of the Consumer Credit Act 1974, including the requirement to have a consumer credit licence issued by the Office of Fair Trading (OFT). The subject matter of the Consumer Credit Act 1974 is reserved to Westminster under Schedule 5, Head C7 of the Scotland Act 1998. The Scottish Parliament therefore has no power to act in this area.
StepChange

1. https://www.fca.org.uk/news/press-releases/payday-lenders-failing-customers-arrears-says-fca
2. StepChange Debt Charity conducted a survey among its clients to find out their experiences of using payday loans. The sample was StepChange Debt Charity clients who came to the charity for advice between 2015-2016 and had all applied for HCSTC after January 2015. We had 530 respondents between 1 August and 14 August 2016.
3. Payday loans are relatively small sums lent over a short period of time at a high interest rate. They were previously lent for around 30 days but can now be longer term instalment loans of two months to a year. This research covers both these loan types using the FCA definition of ‘high-cost short-term credit’: any regulated credit agreement that has an APR equal to or exceeding 100% and is provided for a maximum of 12 months and is not a doorstep loan, bill of sale loan or overdraft.

Figures from StepChange Debt Charity clients from before the regulations and in 2016. The numbers shown are for the whole of 2014, and for the first half of 2016 (January to June inclusive):
20142016
Average balance£1,397£1,380
Proportion of clients with payday loan debt23%16%
Proportion with three loans or more41%37%
Number of people with payday loan debt75,000 (full year)28,000 (half year)

About StepChange Debt Charity

• StepChange Debt Charity provides free and independent debt advice by telephone and through its online Debt Remedy tool.
• StepChange Debt Charity’s vision is a society free of problem debt. Our ethos is founded on helping people to repay their debts where they are able to do so. Where they cannot, we provide advice including, where appropriate, supporting them through insolvency processes. Our advice is always based on the best interests of our clients.
• StepChange Debt Charity is majority funded by voluntary donations from lenders who support the work of the charity. All funding goes towards helping people in problem debt – this includes providing impartial advice, promoting the benefits of free debt advice, and managing all the debt repayment and debt relief options we provide.
• StepChange Debt Charity campaigns for changes to public policy that will prevent problem debt and improve the situation of those affected. Details of the charity’s research can be found here.
• Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.
• The StepChange Debt Charity free phone helpline 0800 138 1111 is open 8am to 8pm, Monday to Friday and 8am to 4pm Saturday.
• Online help is available any time from StepChange Debt Charity Debt Remedy at www.stepchange.org
• Follow us on Twitter: @StepChange and @Moneyaware