Edinburgh Council look at ban on payday loan sites

PAYDAY loan websites, such as Wonga and Quickquid, could be banned from all council computers in Edinburgh as part of plans for an assault on “legal loan sharks”.

Picture: TSPL

Edinburgh City Council is considering blocking access to loan firms’ websites on computers in its libraries and community centres. The council wants to encourage people to use credit unions instead, which provide lending at a lower cost.

A paper drawn up by officials, to be considered at the council’s corporate policy and strategy committee next week, will warn payday loans are crippling some of the city’s poorest families.

It says in 2012-13, £84,000 of payday debt was handled by the council’s advice service, compared with £5,560 in 2011-12.

Loan firms, such as Wonga, are under fire over interest rates. Picture: Complimentary

Some who approached the service had up to eight payday loans, while 28 per cent had rolled over or refinanced at least once, the report says. Across the UK, the Office of Fair Trading estimates that the amount lent in 2011-12 was £2.2 billion, up from £900 million in 2008-9.

If Edinburgh does block payday websites, it will be following in the footsteps of Dundee, East Renfrewshire, Midlothian, Stirling, and Glasgow. Scotland’s largest local authority has also been holding evidence sessions on the impact of its measures and is expected to announce further proposals within weeks.

Kezia Dugdale, Labour MSP for the Lothians, who launched the Debtbusters campaign against payday lending, said Edinburgh’s proposals are a welcome first step. But she added: “I would like them to be bolder.”

Debtbusters also supports the move towards credit unions as an alternative.

While some payday lenders charge rates of more than 4,000 per cent over the course of a year, credit unions can only charge a maximum of 26.8 per cent. Marlene Shiels, chief executive of Capital Credit Union, said that the credit union would charge £8 over the course of a month on a £400 loan, compared with £125 charged by a well-known payday lender.

Russell Hamblin-Boone, chief executive of the Consumer Finance Association, which represents the major short-term lenders in the UK, said: “The council is free to block whichever sites it wishes from its employees’ computers, but doing so for public computers is like banning sweet shops because some people get toothache.”

Council community safety leader, councillor Cammy Day, said: “It is very important that payday loan companies are closely monitored to make sure they are not exploiting vulnerable people or leading people into debt.”