SNP Politicians Call On UK Government To Act On Payday Loans

23 December 2011

Alyn Smith MEP and Margaret Burgess MSP have today renewed a call for the UK Government to intervene on payday loan companies offering short-term loans at astronomical rates of interest.

The companies often charge extortionate rates of interest, some eclipsing 4000% APR. Last year Alyn wrote to the European Commission seeking their guidance on the issue and it was confirmed that it was the competence of each Member State to regulate these companies. Calls from Alyn and other politicians to the UK Government have fallen on deaf ears and the problem continues to grow, resulting in misery for thousands of Scots.

Over the past five years the number of credit companies offering short-term loans has increased dramatically and often see an increase in customers over the festive period, with the promise of "quick approval" and access to cash "within minutes".

Commenting, Alyn said:

"Over this festive period many payday loan companies are targeting hard hit, vulnerable Scots who are in need of a little extra cash in the run up to Christmas. Far from helping though, these sort of loans often lead people deeper into debt with more severe financial difficulties.

"It is clear that some legal restrictions must be put in place in order to curb the ludicrous rates of interest. This has already happened in many other European nations as well as 35 US States, where there is a limit on the maximum interest these companies can charge, so it is possible.

"The UK Government has consistently failed to regulate the financial markets and have done absolutely nothing to reform the system despite an almost global agreement that change must happen. Their ignorance is now leading to misery for thousands of Scots who are turning to these companies at this time of year.

"The European Commission has confirmed that it is up to Member States to enforce regulation on these companies, and with the Scottish Parliament currently lacking the powers to make such an intervention then it is up to the UK Government. Cameron and cronies must get their act together to regulate these companies out of existence before more people face financial ruin as a result."

Margaret Burgess MSP, who was previously a manager the Citizens Advice Scotland, added:

"Whilst working previously at Citizens Advice Scotland, all too often we'd hear from people who had turned to these companies and had trouble dealing with the repayments, which cost them not just in terms of finance but also misery.

"Getting involved with these companies often just traps people in a downward financial spiral which is hard to escape from. It is high time that the UK Government got their act together and properly protected the most vulnerable in our society."