Investigation by Democrat reporter
Jackie Baillie, MSP for Dumbarton, is leading a local fight against illegal loan sharks and pay day lenders. This is part of a wider campaign by Scottish Labour which seeks to put loan sharks and pay day lenders out of business with a new interest-free loan scheme.
Jackie recently met with StepChange, a financial advice charity, which has estimated that there are nearly 700,000 people in Scotland who are already in debt, or are at risk of problem debt.
Further research by Scottish Labour has found that there are around 290,000 children in households without access to £500 to cover an unexpected, but necessary, expense such as repairing essential household items.
There are a number of high street pay day loan business in Dumbarton and the surrounding area including The Money Shop and Ramsdens which both operate on Dumbarton High Street.
There are also far more online pay day lenders which many local people have to turn to when they find themselves in unexpected financial difficulty.
Scottish Labour’s proposed interest free loan scheme would seek to tackle this problem of pay day loans by making funds available for essential household items and furniture, and items which are essential for individuals to access employment opportunities such as a season ticket for travel, tools or clothes for a job interview.
Jackie Baillie said: “Pay day lenders and loan sharks prey on the most vulnerable in our community and play into the desperate situations that many of us have found ourselves in when unexpected costs arise.
“I understand that the idea of having quick access to money when you are most in need of it is an attractive prospect, especially when you have a family to support but the levels of interest that these sharks impose on customers are astronomical and often leave individuals in a worse financial position than before they accessed the loan.
“I am glad to see that Scottish Labour is tackling this issue head on with interest free loans which will help thousands of people across my constituency.”
More people in Scotland are falling behind on their essential bills, for example, 46% of StepChange’s clients had Council Tax Arrears with average arrears of £2,017.
The following table shows the average level of debt per StepChange client for different types of debt.
Statistics released this month show that there were there were 738 approved Debt Arrangement Scheme applications in compared with 646 for the same period one year earlier.
Scottish Labour’s interest-free loans
Jacjie Baillie said: “A Scottish Labour Government would provide the financial backing to offer no-interest loans to those who need them. We would work with local authorities and credit unions to establish the most effective distribution system (some areas have very strong CUs and large common bond areas and some LAs are smaller than others so some discretion is best in the system), and these loans would not replace the Scottish Welfare Fund, for which we continue to support additional funding.
“The loans would be subject to a series of conditions: they would only be available for essential household items and furniture, and items essential to access employment, for example, a season ticket for travel, tools or clothes for a job interview; the repayment period would generally be limited to 24 months but financial circumstances would be taken into account; those taking out the loan would be required to have the means and willingness to repay it; the loans would take the form of payments direct to suppliers with a presumption to use local suppliers wherever possible.
“We would work with local authorities and credit unions to establish the most effective distribution system, and these loans would not replace the Scottish Welfare Fund, for which we continue to support additional funding.”
- There were 2,480,000 households in Scotland in 2018.
- According to the Scottish Household Survey, 45% of households have less than £1,000 in their savings. This is 1,116,000 households.
- For the first year of the fund we would budget for one in ten of these households to apply for the fund at an average loan of £400.
- This would require a pot of c. £50 million