Glasgow Labour MSP Anne McTaggart has welcomed the announcement by Ed Miliband that payday loan companies would be hit with a levy on their profits under a Labour Government.
The Labour leader’s proposal would raise around £20 million a year from lenders either from a 1% levy on their balance sheet or a 10% profits tax. The money raised would be used to help develop credit unions, and would double the £13 million a year currently provided by the Government for their expansion.
Ms McTaggart said “I am delighted that Ed Miliband has pledged to take tougher action on payday loan companies who are ripping off hundreds of thousands of people across Scotland. What adds real value to Labours proposal is that the money raised from this levy will go to help develop credit unions which are a far better alternative to companies such as Wonga.
In Glasgow, we have a real problem with payday lenders who charge extortionate rates of interest. The latest Scottish Index of Multiple Deprivation figures show that 190,000 Glaswegians, one third of the city’s population, live in the 10% of the most deprived areas in Scotland. These communities have the least access to mainstream credit and the highest use of non-standardized lending. Glasgow citizens borrow over £57 million annually through payday lenders, home credit, pawnbrokers, and rent to own outlets. This exploitation of the most vulnerable in our society needs to stop.
The 17th October was International Credit Union Day. Credit unions provide a much better alternative to payday loans by not just offering a far more reasonable interest rate, but also by ensuring the loan is repaid over an affordable period. It is understandable that people value the convenience and speed of payday loans so I’m hopeful that the money provided by Ed Miliband’s levy will help Credit Unions to become more speedy and convenient through investments in new technology and partnerships with employers.”
Glasgow City Council’s Payday Lending Sounding Board gathered a range of views and opinions on the impact and the reasons for the proliferation payday lending and published its report in the summer which made a number of recommendations including:
- Providing all pupils entering their first year at a secondary school in Glasgow the opportunity to open a juvenile Credit union savings account with a donation of £10 per pupil.
- The lobbying of the UK Government for an end to the use of Continuous Payment Authority for any loans under a 26 week term.
- The development of a marketing campaign to promote affordable alternatives to Pay Day Loans.
The final report from the Sounding Board can be read here.
Ed Milibands announcement can be read in full here.