Alex Salmond has called for cap on payday loan interest rates
The UK Government should cap the interest rates of payday loan companies to better regulate the industry, the First Minister has said.
Regulation of the industry is reserved to Westminster under the consumer credit sector but Alex Salmond said lenders would be subject to tougher regulation in an independent Scotland, with restrictions on the practice of "rolling over" debts which sees people unable to pay off initial debts saddled with bigger loans.
Recent moves by the Church of Scotland and Church of England to expand credit unions to help people with financial needs were also welcomed by the First Minister.
The UK Government has not responded to calls from Scottish ministers on the need to cap interest rates for the lenders, the Scottish Government said.
The First Minister said: "It is unacceptable that in a time of financial hardship for many in Scotland, the payday loan industry can prey on some of the most vulnerable in our society, getting them into unmanageable debt through aggressive marketing and charging interest rates that can run to thousands of per cent APR.
"I believe the whole industry must be subject to greater regulation so that we can protect those whose financial situation is desperate enough that they take out these short-term agreements and help them avoid the escalating debt problems that can arise when they run into difficulties paying off the loans.
"That is why I support a three tiered approach to the issue of payday loans. First we need to cap the interest rates that payday lenders can charge, much like the authorities have done in many European countries, such as Germany, Japan, Canada and some states in the United States.
"Second we must restrict the ability of payday lenders to ‘roll over’ the debt, wrapping up an outstanding loan in a further credit agreement that can easily escalate and lead to severe repayment problems.
"And thirdly, the industry must be subject to tighter regulation, with its aggressive marketing campaigns and widespread advertising subject to much greater scrutiny.
"The regulation of payday lenders is currently reserved. With independence we will be able to take action to protect consumers and ensure that the practices that are bringing such misery to many of the poorest in Scotland are brought under control."
Last month, Citizens Advice Scotland reported that staff dealt with 1200 cases related to payday loans over the last three months.
Labour accused the SNP of hypocrisy. The party’s education spokesman Kez Dugdale said: "Clearly the First Minister didn’t check with Fergus Ewing before he belatedly joined the campaign to tackle the scourge of payday lenders.
"When I pressed the Scottish Government to act now to curb payday lenders, I was told they were legal, fair and transparent. But now the First Minister claims he will take them on after independence.
"This is classic hypocrisy from a party content to to use people’s misery to engineer a constitutional argument rather than act now to help them. We have a First Minister more concerned about chasing referendum votes or grabbing headlines than taking the responsibilities of office seriously.
"Whether it be through the planning system, funding credit unions as an alternative or better public information through the government’s own advertising budget, Alex Salmond could act now on payday loans. It’s time he matched his words with action."