The face of Scotland’s high streets changed markedly during the recent recession – as household names like Woolworth’s, Jessop’s and HMV disappeared units often lay empty for months. Some were replaced by pound shops or charity shops but the other notable feature was the growing presence of the payday lenders on our shopping streets – and the Scottish Government is now making moves to limit their numbers.
The measures which are designed to minimise the presence of payday lenders in communities are set out in a new 12 point Scottish Government action plan.
The plan is a result of Scotland’s first Payday Lending Summit earlier this year and based on feedback from local authorities, advice services, welfare organisations and credit unions who attended.
The preventative measures also include the introduction of a new Financial Health Service which will serve as a one-stop-shop for money advice services, and there is an emphasis on promoting credit unions.
Launching the plan on a visit to the Glasgow Central Citizens Advice Bureau, Mr Mackay said:
“This action plan reinforces our commitment to addressing the problems associated with payday lending and sets out a number of actions that we will undertake across a range of policy areas.
“Payday loan companies are not only blighting our high streets but they are exposing people to financial credit they just cannot afford.
“Bringing the industry together at the Payday Lending Summit was a real opportunity to share ideas and discuss ways of reducing the problem of payday lenders in town centres.
“I won’t pretend that this action plan will solve the problem overnight but it’s a step in the right direction. Through legislation we will remove some of the exemptions from planning control on premises that sell pay day loans. This will allow planning authorities to implement policies addressing future clustering and over-provision of such activities. The planning proposals also include similar changes regarding controls on betting shops.
“We’re making conditions tougher for payday lenders by excluding them from small business bonus schemes and working with the Financial Conduct Authority to tighten up regulations.”
Mr Mackay continued: “We’re taking steps to tackle the issue of problem debt through legislation such as the Bankruptcy and Debt Advice (Scotland) Act, but raising awareness of alternative ways of accessing credit is key. By showing people payday lenders are not the only option we can lessen the demand for the service.
“Our new Financial Health Service website will bring together different strands and sources of information and advice, so that anybody with a concern or an issue to do with debt or borrowing can find, in one place, the help and assistance that they need.
“With our limited powers we are doing what we can, but with independence we could do so much more to act quickly to offer protection to consumers.
“Whilst we welcome the tougher FCA regulatory regime and the consultation on a cap, the UK Government have been slow to act. We have been calling for a cap on the cost of pay day loans since 2012. In an independent Scotland we can act more quickly to protect Scottish consumers, and introduce policies and measures that reflect the needs of people living in Scotland.
“Tackling the increasing numbers of payday lending businesses will not only stop more people being driven into poverty, but will help give our town centres a sense of identity and be more attractive places for people to live, work and visit.”
There are an estimated 180 to 200 payday lenders on Scotland’s high streets.
Stewart*, 46, owed £18,000 in unsecured debts, and tried various fee-charging debt management companies before contacting StepChange Debt Charity.
Stewart said: “Although I was working full-time, I found myself relying on credit cards to pay for things like bills and food shopping.
“When my cards were maxed out, I was refused more credit by my bank and offered no help.
“I felt like I had nowhere else to go, which is when I turned to payday loans and I ended up relying on them to get me through.”
Stewart was able to take out three payday loans despite already having significant debts.
He also noticed a dramatic rise in nuisance calls, texts and emails offering further loans and debt management services.
Owing £18,000 in unsecured debts, Stewart tried various fee-charging debt management companies – who he says charged administrative fees and kept important information hidden – before contacting StepChange Debt Charity.
He is now repaying his debts through a Debt Management Plan, and says he would never be tempted to take out another loan following his bad experiences.
Stewart continued: “I can remember waking up in the mornings and thinking this is going to be a struggle. I’m really happy now, and going back to that is not something I could even think about.”
* Case study name changed to protect identity.
“There has been a proliferation of payday loan shops throughout our communities so we welcome moves to restrict them though the planning process. Accessing loans through a payday lender seems easy when so many shops are on our high streets and lenders bombard us with adverts for credit. But paying back such loans is not always easy and it is often the poor practices of payday lenders that cause problems to occur for people who can easily get into difficulty making their repayments.
“Citizens Advice Bureaux in Scotland are dealing with over 100 cases involving payday loans every week and our research shows that a fifth of people access such loans through high street shops.
“It is often poor practices by payday lenders that cause problems which is why CAS has campaigned for several years now to tackle to the unfair practices of payday lenders and make sure the people of Scotland know that their local CAB can give them advice and help if they do get into difficulty.”
Anyone who needs debt advice can get free, confidential help from their local CAB or from our helpline on 0808 800 9060.
Sharon Bell of StepChange also presented at the Payday Lending Summit. She said:
“This Scottish Government action plan is welcome – anything that better protects consumers from these loans and their potentially damaging repercussions is good news.
“We see too many people falling back on such high cost credit in order to either cope with existing debt problems, or just to make ends meet, often to damaging effect. Taking on this type of borrowing is not a solution to financial difficulty, and instead these people need better protection from the pressures of debt.
“StepChange is calling on policymakers to consider the idea of ‘breathing space’ – a break from interest, charges and enforcement, where debts can be repaid over an agreed period – so debtors in difficulty don’t have to keep borrowing to service borrowing.
“We also need a better short term credit market, where banks, credit unions and employers play a role in providing more responsible sources of loans and we hope the UK Government will do more to promote such schemes.”
StepChange Debt Charity Scotland offers free and impartial debt advice and solutions through its freephone helpline (0800 138 1111) and online (www.stepchange.org).
Local free, independent debt advice is available at Granton Information Centre on West Granton Road, telephone 551 2459 or 552 0458.