This week I have been highlighting the terrible impact of payday lending on individuals and families. Citizens Advice Scotland is running an excellent campaign, which appears to be backed by none other than Santa, as you can see!
I also took part in a debate on the issue, secured by fellow Lothian MSP Kezia Dugdale.
Read on to see what I said in the debate.
I welcome the opportunity to raise awareness of the impact of payday lending on individuals and families who felt that they had no option but to apply for a short-term loan when that next pay day was too far away, or when there was not enough food in the cupboard or money for the electricity meter or bus fares to get to work or college.
It is not surprising that people turn to that form of credit, because the ubiquity of advertising for payday loans in our newspapers and on our televisions and radios is remarkable. Last year, that accounted for 1.2 per cent of all advertising on TV in the UK. Kezia Dugdale highlighted that, in 2008, payday lenders bought 17,000 ad spots; last year, that number had risen to 397,000. More than one in 100 ads was a payday loan ad. The non-stop barrage normalises payday lending in our culture. As Graeme Pearson noted, according to Ofcom research, children aged four to 15 saw millions of ads from payday lenders. We have heard that very young children are pestering their parents to apply for a payday loan.
We know, too, that people turn to such loans as a last resort. In the past three years, 6 million Britons have been declined credit by their bank. Affordable alternative credit is part of the solution.
The number of clients with arrears in priority areas such as gas, electricity and rent has increased significantly. Credit is being sought not for luxuries but for everyday living costs. In the face of inflation-busting price hikes by the big six energy companies, it is not surprising that energy arrears affect more than one in 10 people. Organisations such as Citizens Advice Scotland and StepChange are working incredibly hard, hearing from and seeing a notable increase in the number of people seeking their expert help in the face of rising personal and household debt.
When a person does not have £10, £10 of debt is a problem. However, a growing number of high-income clients are approaching those invaluable charities, too. In addition, although average unsecured debt has been falling in the UK for the past five years, more than 10 per cent of StepChange client debt in Scotland last year was due to payday loans; that was the largest share among the home nations.
Many clients with payday loans have contractual payments that are worth more than 100 per cent of their income. Citizens Advice Scotland has reported cases in which payday loans were received by clients who were unable to repay that loan, so the vetting was inadequate. I was horrified to learn of the case of a client in a citizens advice bureau in the east of Scotland whose payday lender contacted his workplace and spoke to his colleagues about his outstanding debt and, even though he had set up an affordable repayment schedule, the agent was demanding full payment.
When I first saw an advert for payday lending on television, I thought that there was a typo in it, because I simply could not accept that it could be possible or legal to advertise interest rates of almost 3,000 per cent or higher. Those of us on the Economy, Energy and Tourism Committee know that people do not purposely lead themselves into debt; they enter a credit agreement with the best of intentions, but sometimes employment and family circumstances change with little notice.
Along with other members in the chamber, I am absolutely committed to do all that I can to mitigate the impacts of payday lending.