There has been an exponential growth in the UK payday loan market, with an increasing incidence of our clients in Scotland being unable to pay their rent, mortgage or utility bills due to indebtedness to exploitative payday loans. With payday loans having equvialent APRs of 3,000 to 5,000% - clearly usury, unethical and unfair - Govan Law Centre (GLC) believes the Scottish Government and Parliament must look to a solution in the public and consumer interests.
The Minister for Debt and Insolvency in Scotland, Fergus Ewing MSP, has accepted there is a problem with payday lending and has stated his belief that greater regulation is needed by Westminster. Yet, there is much the Scottish Parliament could do to help Scots struggling to meet the unfair and unsustainable costs of high interest credit.
GLC is publishing a Discussion Paper, which proposes the creation of a new sub-category of the Debt Arrangement Scheme (DAS), which could be designed to provide a fair but flexible form of debt relief for high interest credit only. This would mean that instead of all debts being repaid as part of a Debt Payment Programme (DPP), the debtor would have an option of repaying payday loans in a 'mini-DAS' on a fast track basis.
Such a 'fast track' scheme could target usury rate loans by ensuring the principal sum(s) were repaid fairly within 24 months, with high interest and roll-over charges being suspended and written off following a successful repayment of the debt. Such a scheme could provide essential respite to consumers in Scotland trapped in a cycle of payday loans, enabling other priority debts to be paid, and helping citizens to take control of their financial position. We would welcome your thoughts on this proposal: GLC Discussion Paper on a new Fast Track DAS for usury rate loans in Scotland.
Finally, we believe that the Scottish Ministers already have power from sections 7 and 7A of the Debt Arrangement and Attachment (Scotland) Act 2002 to introduce a Fast Track DAS for payday loans right now, without the need for primary legislation or undue delay.