PAYDAY lenders will face tougher regulations in an independent Scotland, enterprise minister Fergus Ewing has said.
Mr Ewing has hailed a sharp rise in people turning to credit unions for loans, urging more businesses to set up the credit schemes which cap interest at around 26.8 per cent APR.
Payday lenders, which can charge up to 5,000 per cent APR, have been described as “a financial cancer” by one credit union.
Mr Ewing said: “Credit union membership enables Scots at every income level access to loans, repayable at a much more affordable interest rate than those of payday lenders, which can be as high as 5,000 per cent.
“I urge those businesses not already associated with a credit union to consider this free employee benefit.
“In an independent Scotland we will protect consumers by ensuring payday lenders are subject to tougher regulation.”
More than 400 people join credit unions every week, according to the Association of British Credit Unions.
Kingdom Credit Union in Fife attracted 391 new members in the last two months of 2013 to push total membership to more than 5,000. Glasgow Credit Union signed up 733 new members, a 260 per cent increase on the previous year.
Mr Ewing said: “The sharp rise in people joining credit unions is encouraging as is the increasing number of businesses, such as ScotRail, Alexander Dennis and Stagecoach, in Scotland seeking ways to offer support to their employees.
John Mackin, chief executive of the Scottish Transport Credit Union, said: “Payday lenders are a financial cancer and credit unions offer one route for people to avoid them.
“Where credit unions offer safe and ethical lending, these payday loan companies continue to be a thorn in the side of those who used to be able to turn to their high street bank for small, short term loans.”
Robert Kelly, general manager from the NHS Credit Union, said: “Employers are not just doing this for corporate social responsibility reasons. The recession has made staff susceptible to enhanced levels of stress. This stress can cause a decrease in motivation and productivity, and an increase in illness related absenteeism – a real cost for businesses.”