Citizens Advice Scotland have welcomed reports that the government is to consider enabling a cap on ‘payday loan’ interest rates.
It has been reported tonight by the BBC that the government is to give the planned Financial Conduct Authority the power to limit lenders’ interest charges.
CAS Chief Executive Margaret Lynch says,
“We need to see more detail of exactly what is being proposed, but there is no doubt that the high interest rates associated with payday loans is a huge problem, and has led many families into the misery of debt.
“Rates as high as 4,000% have a huge impact on people who are struggling on low incomes. We have long called for action to tackle this issue, and if the government is now moving towards restricting these high interest rates then we would see that as a very positive step.
“CAB advisers see families every day who are struggling to make ends meet. Many of the people we see feel they have no option but to borrow money, just to meet essential costs like rent, food and fuel. Last year the Scottish CAB service saw 50 new cases every day of people who had taken out a payday loan and were unable to keep up the repayments.
“There are other problems associated with payday loans, and that is why this week we have supported the lending industry’s new voluntary code of conduct. But the high interest rates are the core problem, and tackling these would be the key to saving thousands of people from getting stuck in a spiral of debt."
Attached is the report CAS launched this week on payday loans, which includes case study evidence seen by Scottish CABs.