Smith Calls For EU Action On Payday Loans

06 December 2010
SNP MEP Alyn Smith is calling for the European Commission to intervene over credit companies offering loans of more than 2000% APR on the grounds that in his view they breach EU consumer protection legislation. Smith says Westminster failure to stop these predatory firms has spurred him to seek intervention from the EU given the Holyrood Parliament does not have the power to regulate them, and has written to EU Consumer Policy Commissioner John Dalli urging him to investigate and intervene.

Rapidly growing payday loan firms cater for people who need quick loans before payday and use the slogan 'make today pay day'.  Adverts claim that they give 'quick approval' and if you apply before 2.30pm you could pocket the money the same day.  However, what they fail to boast about is the typical annual rate of APR of 2,278% they charge which is hidden in the small print.

In 2009/10 the CAB service in Scotland dealt with 135,035 new debt issues, over 20,000 of which were regarding personal loans - including payday and high cost loans. Four in 5 debt cases were regarding difficulties in making payments.  The courts in Scotland are also being clogged with people who have fallen into difficulties, and Smith has written to Justice Minister Fergus Ewing asking for a breakdown of just how much the courts in Scotland are having to shell out to cope with the increased volume of cases.

Smith said:

"These are tough times, and a lot of folk are desperate.  In the run up to Christmas these pay day loan adverts are targeting hard-hit, vulnerable Scots and instead of solving temporary cash flow difficulties they are getting people deeper into debt.

"The UK regulators may give these firms a clean bill of health, but we've already seen where the priorities of the London regulators lie, and it ain't with the wee guy.  Westminster let the banks get off with murder and look what happened, now they are allowing these payday loan companies take consumers down the same path of destruction and aside from the human misery they cause it is our CABs and courts service that is picking up the pieces at our expense.  I think these firms are breaking EU rules, and if after an investigation finds they're not, then the law needs to be changed.

"With the credit crunch biting hard these firms are using effective marketing ploys such as  TV adverts, Facebook and iPhone applications to mislead and entice people to get a quick fix of money to pay for that much wanted Christmas gift. I want to see these companies regulated out of existence.  Vulnerable citizens such as hard-hit families and students need to be protected from such staggering interest rates.  If the UK government continues to fail consumers then the European Commission will have to step in before it's too late."