Pay day lending is a dangerous business. There are no doubts about it. It preys on the needs of the vulnerable that have been created by failure: the failure of our banking system; the failure of our consumer right laws; the failure of our benefit system; and most importantly our failure to protect the most vulnerable.
It less seduces it’s victims with the honeyed fragrance of easy money, than pedals quick fixes to them with all the subtlety and tact of drug dealers. It targets its victims by identifying their weaknesses. Can’t pay the rent: that’s okay we can help; can’t feed the children: here you go; electricity about to be cut: don’t worry.
The experience of many with pay day loans is one of helplessness and desperation. Helplessness as each month the loan rolls over and you know you are sinking deeper and deeper into a hole. Desperation as you realise the possibility of being able to replace the children’s shoes, clothes and uniforms is growing increasingly remote. The desperation that comes from the realisation that one day it may be your children who will be going to school with inappropriate shoes; jackets; lunches.
It causes depression; fear of answering the phone; avoidance of opening the door. Mail lies unopened. Strangers intrude on your doorstep and violate you and your family’s privacy seeking payment.
And Fergus Ewing, the Minister for Energy, Enterprise and Tourism calls this a “legal, fair and transparent” business.
I don’t blame the Scottish Government for the pay day loan industry. How could I? They don’t have legislative authority over consumer credit laws, they can’t cap the interest rates and they don’t have any control over the key economic levers they need to boost employment and growth in our economy.
I can be angry with them, however, for not going to war with them. I can be angry that they won’t do more to discourage the use of these loans, to promote alternatives such as credit unions and I can be angry that they won’t use the powers they have to send a message that they aren’t welcome here.
Fergus Ewing takes the view this would be “inappropriate”; but for reasons of public health it was not inappropriate to take action to discourage smoking; it was not inappropriate to use our existing powers to restrict the use of alcohol through minimum pricing and it wasn’t inappropriate for the Scottish Government to challenge the authority of the Supreme Court.
Pay day loans are a scourge on our society and have grown up and thrived in the cesspit of financial failure that we have been exposed to in the last few years.
But powers do exist which would allow the Scottish Government to act now.
Debt law is an area that has been devolved to the Scottish Parliament. It is possible for certain debts to be treated differently and for interest rates to be frozen or varied once someone is struggling to pay them. Already such a Scheme exists in the form of the Debt Arrangement Scheme, but although this allows pay day loans to be included and for all interest, fees and charges to be frozen, it takes too long to use and allows payday loan companies to benefit from dragging their feet.
It’s within the legislative authority of the Scottish Government to create a new scheme or amend the existing one to create a more streamlined approach with specific rules for pay day loans. The powers allowing for such a scheme exist in the Debt Arrangement and Attachment (Scotland) Act 2004 s7 and s7a.
This, however, requires political commitment: a commitment borne out of a belief that pay day loans are nothing but fair or transparent and the only thing that would be inappropriate is to do nothing. A commitment that is borne out of an understanding of how closely related these firms and their practices are to the issue of poverty; and a commitment that is driven by a belief that the powers of the Scottish Parliament exist if for no other reason, but to make the lives of Scots better and to protect the most vulnerable.
Alan McIntosh is a Legal and Money Advice Training Manger and regularly blogs at www.morallybankrupt.co.uk . A discussion paper by Govan Law Centre proposing a Debt Arrangement Scheme for payday loans can be read here.