Debt worries on Skye as charity reveals scale of payday loan use

BY MICHAEL RUSSELL

Low wages are forcing people on Skye to turn to payday lenders to pay for essentials such as food and rent, new findings suggest.

Figures published this week by the debt charity Step Change show that, with an average payday loan debt of £2,419 per client — more than £1000 above the Scottish average — the Skye, Badenoch and Lochaber constituency has the third highest payday loan debt in Scotland. These loans are often acquired using a smartphone, and borrowers can be hit with very high interest rates if they fail to repay in time.

The Skye and Lochalsh Citizens Advice Bureau has urged people to approach a credit union for an emergency loan rather than “rip off” payday lenders.

In a separate survey, Citizens Advice Scotland found that half of all those with a payday loan were in full-time work but whose wages were insufficient to cover basic necessities such as food and bills.

Helynn Macleod, a debt adviser with Portree’s CAB, said people who require short-term credit will get a much better deal from a credit union than they will from a payday lender.

She added: “Rising prices and falling incomes mean that many people are really struggling to make ends meet, not least because of the removal of large parts of the welfare safety net. So it’s no surprise that people are increasingly turning to payday lenders.

“However, these rip off loans come with massive charges that push people further into financial hardship. If people are having difficulty with their benefit payments, rent arrears or debts we would urge them to seek advice rather than turn to payday lenders for a short term fix.

“Don’t forget you can also get free, confidential advice from the CAB service on all sorts of issues, including budgeting and debt management.”

Highlands and Islands MSP Rhoda Grant, who last week launched her anti-payday loan campaign “Debtbusters”, said she was “shocked” by the Step Change findings.

She added: “This is frankly tragic news as many people are taking out these loans to pay for the absolute basics such as food, gas or electricity bills and rent. In some instances people are taking out payday loans in order to pay off the credit card that was used for the basics last month.

“As Christmas gets closer the financial pressure on families and individuals grows and this will push more people into debt. This is why it is crucial to make people aware of alternative lenders such as the Hi-Scot credit union who are able to provide loans at much lower interest rates than the legal loan sharks.”

It emerged earlier this week that the Banking Reform Bill is to include provision to cap the interest rates applied to loans. The level of the cap is to be decided by the Financial Conduct Authority.

michael.russell@whfp.co.uk