General Assembly: Pay day loan firms ‘doing great damage to society’
THE Kirk has attacked companies that make pay day loans with sky-high interest rates, accusing them of causing “a great deal of damage in our society” and calling for greater regulation.
Athe General Assembly in Edinburgh today the Kirk repeatedly criticised the UK government over its handling of the economy. Presenting the report from the Kirk’s Special Commission on the Purposes of Economic Activity, which examined the ethical issues thrown up by the financial crisis, its convener Professor Charles Munn said interest rates charged by so-called “pay day loan companies” were a prime concern.
“We were very conscious that the levels of interest rates some people are paying for consumer credit, that means very often people borrowing money just to meet very basic human needs, some were using pay day loan companies, some of which charge 4,000 per cent interest for their loans,” he said.
“And so it’s pretty clear that sort of activity is doing a great deal of damage in our society and we need to change it, and recognising that this would not be easy, that the only way to do that is to place a cap on interest rates.”
He said other countries and some US states already capped such interest rates, but said there seemed little political appetite for it.
Prof Munn added that credit unions and mutual associations should be encouraged to take the place of such pay day loan organisations, as safer ways of accessing loans.
In a hard-hitting speech, he said that, as a society, “we have made a mess of our economy and in the process have done a lot of damage”. “We are party to growing inequality, rising poverty, rising homelessness,” he said. “The rich are doing ok. The poor are getting poorer.
“And it’s not just the poor that are getting poorer, pretty much everybody else is suffering as a result of the economic crisis.”
Earlier in the day’s proceedings, Rev Ian Galloway, departing convener of the influential Church and Society Council, attacked the UK government’s deficit reduction strategy, saying that it was punishing the poorest parts of society “out of all proportion”.
He said: “If austerity means we all have to tighten our belts – and maybe especially those who can most afford it – then so be it. But what is really happening is that the most vulnerable are being punished out of all proportion.”
He said that while austerity had a “stiff upper lip quality about it”, the reality was “somewhat different”. “Food banks, places for desperate people to find something to eat are opening across the UK at a rate of one every four days,” he said.
Prof Munn also criticised the UK government’s handling of the tax system, saying that the commission had been “appalled” at the huge number of organisations, companies and individuals involved in tax evasion.