THERE’S just one pay cheque left before Christmas. There are presents to buy, staff nights out to pay for, the extortionate food bill. Then there’s the aftermath, when January’s pay cheque evaporates paying all those bills marked “Urgent”.
No wonder more Scots are turning to short-term high-interest loans to tide them over. Payday loan lenders are one of the fastest-growing industries in the country and they’re making a fast buck out of the financial misery of thousands of Scots.
People are taking these loans out to pay for the basics: food, the gas bill, the rent. If things are really bad, it’s to pay off the credit card that paid for these things last month.
Citizens Advice Scotland will publish a report later this month about payday loan lenders and their impact, and I’ve had a sneak peek of the results. What’s clear is that the average person taking out a payday loan isn’t someone out of work. Neither is it carefree grannies, as featured on one particular payday loan lender’s prime-time TV ads. It’s working Scotland: folk feeling the pinch, struggling to cope with the rising cost of everything.
Nearly half are under 35, whilst 30 per cent own their homes. Three out of four are in full-time employment, and more often than not it’s men who are likely to respond to the shiny carefree advertising.
It’s no surprise, therefore, that the major payday loan lenders are targeting football supporters, whether it’s sponsorship of Newcastle United’s stadium or Heart of Midlothian’s children’s kits – there’s no escaping the promise of “straight-talking money”.
In response, I’ve set up a campaign called Debtbusters which seeks to do three things. First, warn against the dangers of payday loan lenders. Second, to promote debt advice services and affordable credit solutions, particularly credit unions. And, finally, to change the law.
Next year’s Scottish Government Bankruptcy Bill could include a raft of measures to help people who have accrued debt, and would allow the government to be bold. But it’s not the only way the government could act. I have challenged the Scottish Government to use its social advertising budget to warn people against the dangers of payday loans. If we can spend money on health warnings, why not wealth warnings? We should warn against the predatory practices of these lenders.
The SNP replied by saying it would be “inappropriate” and that these lenders were acting in a “legal, fair and transparent” way. Words spoken by a minister who has clearly never borrowed money at an APR of 4,200 per cent.
The SNP government could also do so much more to support the development of credit unions. The blunt reality is that people will only stop going to payday loan lenders when there’s a credible and accessible alternative. Credit unions offer loans at a lending rate in double figures instead of four. In order to do that, though, they need a large enough membership base to draw from, a loan guarantee fund to expand their range of financial services and preferred creditor status, or at the very least not to be at the back of the queue if the worst happens.
We also need to look at our high streets. A recent appeal to Scottish Government planners had an unenviable decision to make: what’s better for the viability and vitality of our town centres, an empty retail unit or a cheque cashing centre? The planner ruled in favour of the payday loan shop, stating that it would “revitalise a key part of the town centre”. How desperately sad that a retail unit which trades in poverty and hard times is preferable to one that simply hints at it.
Stronger planning guidelines could tackle this and find a way of ensuring they can’t be sited next to bookies. Stand outside Glasgow Central Station and there are no fewer than four payday loan shops in your line of vision, and in three out of four occasions across the city, they’re right next to a bookmakers. Coincidence?
The introduction of Universal Credit next year means that everyone will now need a bank account to access their benefits. Currently, there are 125,000 adults in Scotland living in households without one. The only thing you need for a payday loan is a bank account. The customer base for these predatory legal loan sharks is about to explode.
A Scottish Government committed to social justice would combat the proliferation of these lenders in our communities, and I won’t stop until that happens. You can bank on that.
• Kezia Dugdale is a Labour MSP for Lothian and shadow minister for youth employment