Cathcart MSP, James Dornan, has urged the UK Government to take action on high interest pay day loans.
The issue affects many households across the country, with some companies charging as much as 4000% APR.
A report from The Scottish Financial Inclusion Service highlighted the case of one individual from Castlemilk, in Mr Dornan’s constituency, where they had borrowed £493 from a high interest creditor, but after paying back £460 of this, realised that only £60 counted towards the principal sum – meaning that the other £370 had been paid in interest.
Speaking in a debate on the issue in The Scottish Parliament, the SNP MSP said: “it comes as no surprise that the recent R3 report on this issue found that 68% of people who had taken out a high interest pay day loan did so because they could not get access to credit elsewhere.
“It’s true that most people taking out these loans know what the interest rate is, but the accessibility often gives them a last chance to access credit that is denied elsewhere – and of course the problems arise when these high interest pay day loans can’t be paid back.
“I would urge people who are seeking credit, as many are in these tough times, to seriously think about where they obtain it from. Seek as much advice as possible from your local Citizens Advice Bureau, speak to your bank, or visit your local credit union. There are sensible alternatives out there that are much more financially manageable.”
Calling for action from The UK Government, James Dornan said: “However the UK Government surely cannot fail to recognise the scourge that these high interests loans are causing across the country, and they must take action to curb the level of interest that any creditor can charge. Many more will suffer at the hands of these creditors should they fail to act”
Angus McIntosh, from Castlemilk Law Centre, and also a board member of Castlemilk Credit Union, says: “Being rooted in the local community, and accountable to it’s members, Credit Unions offer a more responsible way to borrow money.
“I would urge anyone who is seeking credit to speak to their local Credit Union to see what alternatives to high interest pay day loans, might be open to them.”
A copy of the R3 report can be found here: http://www.r3.org.uk/media/documents/policy/research_reports/personal_debt_snap/R3-Personal-Debt-Snapshot-Wave-6-2011-Dec.pdf