The choices available to those who are living with low wages and few financial resources can be stark. It is a shocking statistic that one in four of our children in 21st century Scotland are living in poverty.
The financial pressure on families at the lower end of the income spectrum can be immense. Those who are in the lower income bracket tend to have to pay more for many of the basics in life, such as electricity, gas and worst of all, credit.
Access to affordable credit is a major issue for many in our society. Too many are financially exploited by large financial corporations and are charged usury interest rates. This is credit required to buy basic household goods or just to make ends meet!
Rates of 1000 or 2000 per cent are not uncommon. Putting this into real terms, if someone uses a high cost lender to purchase, say, a £300 washing machine, they may end up paying more than £800 once interest and other charges are taken into account. Preying on this vulnerability should have no place in 21st century Scotland.
Those with wider options may well get this washing machine on six months interest free, because they are deemed to be more ‘credit worthy’ so pay no more than £300. Is this fair?
What can be done to rid our communities of the exploitation of those who are most exposed to predatory loan products? Well, the government could be more proactive and not just leave things to market forces.
In the USA, seen as the home of free markets, their moral and ethical standards led to the introduction of Usury Laws to stop the financial exploitation of citizens. In many US states there are caps on interest rates which ensure all citizens have access to affordable finance.
Pay day lenders have been driven out of many states and migrated to the UK, hence the rise over the last decade of such companies here.
Why can’t we follow their example? An affordable cap on interest rates would be a big step forward – even a 50 per cent maximum rate per annum would be a start. But is there the will?
If we helped those at the lower end of the financial spectrum then it would ease the strain on their finances and put extra pounds in their pockets. In turn, it would help them get out of the poverty trap and break the ‘cycle of dependence’ on high cost lenders. Community Banks, credit unions and CDFI all do their bit to help here but we do need the Government and financial regulators to do their bit as well. They need to put in place the structures, laws and regulations that will help the most vulnerable in our society get the fair and just access that we all deserve.
Reverend Iain May is founder of Castle Community Bank, Edinburgh.