Pay Day Lenders in Glasgow: Straight Talking Misery
On the day the Office of Fair Trading has confirmed it is to refer the payday loans market to the Competition Commission to investigate “deep-rooted” problems, Glasgow’s City Treasurer, Councillor Paul Rooney, writes exclusively for LabourHame on the action being taken by the City.
As a Labour councillor in Glasgow, I have seen too many families catapulted into a mire of debt because of an explosion of high interest lending firms. Pay day lending is causing havoc and preying on hard-working families struggling to make ends meet. We all have a duty to stand up and fight against this tsunami before it brings more families to their knees.
Just last year, a Labour led motion condemning the tactics used by too many pay day lenders and pledging to investigate how the city might mitigate against their impact, attracted cross part support and led to the creation of the Pay Day Loans Sounding Board here in Glasgow.
The Board was created to investigate the extent and impact of payday loans in the city and has already proposed an innovative range of actions for all levels of government. Labour in Glasgow are determined to use all of our powers, our influence and our collective political voice to ensure people are not trapped in a system that offers them little protection and inadequate access to affordable credit. The information we have gathered to date is startling.
Pay day lending in the UK is a £2 billion business.
Our investigation has found evidence that around 100,000 people in the City are using some sort of non standard credit, fuelling a market in the City worth more than £57 million a year.
To put that in context, it is enough people to fill Celtic Park and Ibrox at the same time. If you do not have a payday loan; someone you know does. I fear this is the tip of the iceberg.
There are hundreds of lending firms that have popped up in our high streets. The cheapest amongst them charge interest of around 1,700% APR – but the market leaders are in excess of 4,000%.
Agencies dealing with customers struggling with short-term loans say they are logging 50 new cases every day in Scotland.
In researching this issue what has become clear here in Glasgow is that there is a need to reform how this market is regulated. I heard evidence of borrowers facing desperate problems as a result of questionable practices from some lenders.
For example, borrowers taking loans from as little as £30 to thousands of pounds, spread between various lenders. Or a man who used loans to finance a gambling spree and managed to borrow from one shopfront lender three times in the one day.
Another woman from the City borrowed £1,500 from seven different lenders over a period of a few days. Only one made any attempt to verify her employment status and income.
Sadly, the most common scenario we witnessed was those who took an initial loan to cover a one-off emergency – often around Christmas – but ended up stuck in a cycle of borrowing and paying off new debt equal to their weekly or in once case, their monthly wage. It is clear that this is a vicious circle.
So what can and have we done? It would be pointless for us just to stand on the sidelines and demand action from other people.
This is something that is happening in our city and in our communities – and we all have a responsibility to use whatever powers we have.
Well we’ve made some simple changes to our council practices:
We have already blocked access to payday loan websites on our networks – and some of the biggest organisations in the city have agreed to join us; from Glasgow Housing Association and SPT to Scottish Enterprise and our partners in the emergency services.
We will not lease property to payday lenders and we will ask Strathclyde Pension Fund, one of the biggest and most influential in the country, not to invest directly in these businesses.
And because evidence suggests that many people struggling with payday loans would have been
better served by a credit union, the Labour administration at Glasgow City Council will ensure that £10 is deposited in a community credit union account for every new secondary school student across the city from August 2013 – up to 6,000 young people every year. Over time, this will ensure that every young person in the city has access to a dependable, responsible option for savings and money advice.
Payday lenders are not going to go away and this will not be fixed overnight but here in Glasgow the Labour group are determined to do everything we can to support those hard working families who find themselves caught by scrupulous lenders.
Paul Rooney is the Councillor for Garscadden/Scotstounhil on Glasgow City Council and is the City Treasurer.
Follow Paul on Twitter: @CllrPaulRooney