The Scottish National Party has called on the UK Government to take action against the high rates charged by payday loan companies, who are making a killing post-Christmas from hundreds of thousands of Scots trying to keep a roof over their heads, says Scottish Debt Advice Company; Sequestration.net.
Many countries have already taken action to curb the actions of payday loans companies, but the UK is among the few that has not and the SNP is calling for the Government to step in and sort out the issue of “ludicrous" interest rates.
MEP Alyn Smith is leading the drive to curb the payday loans companies, as evidence that vulnerable people are being left with severe financial difficulties begins to mount up. "Cameron and his cronies must get their act together and regulate these companies out of existence before more people face financial ruin as a result," said Mr Smith. “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."
With annual interest rates of more than 4,000%, payday loans are the most expensive short-term way of borrowing money compared to other methods such as authorised overdrafts or credit cards. Such is the concern, most of the countries in Europe and the majority of the United States have introduced legislation to curb their activities.
"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,” said Mr Smith.
Mr Smith joins many other vocal supporters for payday loans to be controlled, including the SNP MSP of Cunninghame South and former director of the Citizens Advice Scotland, Margaret Burgess, who has lodged a motion for a debate in the Scottish Parliament.
Margaret said: “[It] often just traps people in a downward financial spiral which is hard to escape from. I can understand why many people turn to these companies to meet unexpected bills or to make the money stretch a little bit further but the lack of regulation is a real problem. The Scottish Parliament must speak up for those who find themselves stuck in the debt trap and I hope other parties will sign up to a debate on the issue."
A spokesperson for Scottish Bankruptcy Company, Sequestration.net, said: “There’s been a rising crescendo of voice against the disproportionate APR’s charged by payday loan companies. This month the problem will become particularly acute for many people in Scotland, as they rely on a payday loan to help them pay rent or mortgage after festive overspending. This is very dangerous territory. The ease that payday loans are issued make it too tempting for people to throw caution to the wind and spend too much at Christmas knowing they can get ‘easy’ money in the New Year.
“But there’s nothing easy about it when it can’t be paid back and that 4,000% interest starts to roll up,” concluded the spokesperson.