The First Minister said people in Scotland were getting into severe financial trouble by using short-term credit with extremely high interest rates and huge default charges putting pressure on some of the poorest in the country.
Salmond 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.”
He added that the whole industry must be subject to greater regulation so that people in a desperate financial situation are protected and are given help to avoid the escalating debt problems that can arise when they run into difficulties paying off the loans.
Salmond said his policy was for short-term interest rates to be capped, as they are in many countries in Europe, Japan, Canada and some US states, coupled with regulation of advertising and restrictions placed on the rolling over of loans
The First Minister called on the UK Government to act now on this issue putting in place the multi-pronged approach of the Scottish government that would restrict the likelihood of vulnerable people getting into financial trouble through short-term lending.
His intervention comes after representations made by Scottish ministers to their UK government counterparts, seeking a cap on interest rates as part of a toughening of the regulations surrounding the industry, were not responded to.
Salmond also welcomed recent moves by the Church of Scotland and Church of England to put in place more credit union facilities, of which there is a long tradition in Scotland, to help poor people access credit at reasonable rates.
He said: “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.”
Salmond said that independence will allow the Scottish government 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.
He added: “Until we get those powers I would urge the UK government to act now and take action on this sector. I welcome moves to clamp down on advertising but bolder action such as restricting the roll-over of loans and implementing the interest rate cap is required to address the problems that are evident.”
