Concern has been expressed by the Scottish Borders Council about the influence of short term loans companies in the region and, more specifically, the way in which very high interest rates are masked in the advertising by many of these companies.
According to the Roxburgh Citizen Advice Bureau’s manager, Pat Buckley, the number of people who have been coming to the bureaus seeking advice about debt problems relating to short term loans has risen by a factor of four in the last five years alone. Mrs Buckley welcomed the decision by the Scottish Borders Council to support a Liberal democrat councillor, David Raw, and his campaign to get the Scottish and Westminster Parliament to legislate against high APRs and, in particular, the way in which they have nt been a focus of adertising.
Mr Raw’s suggestion is that any short term loans advertising on the television shoud show the APR in bood at the top of the advert as well as the penalties for late repayment so that potential borrowers would know what they were getting themselves into.
The recent investigation by the Office of Fair Trading into instant cash loan company practice is not focusing on the interest rates as such, but the transparency of the advertising has been one of the aspects of the investigation.
Britain is still one of the few countries in the western world that does not regulate interest rates. Many of the individual states in the United States and Australia, for instance, already have a cap on short term loan rates.
Mr Raw gave numerous examples of tales of woe from the Scottish Borders of people who had taken out small loans, but were unabe to repay them on time, consequently incurring much higher rates of interest. There were stories of some people taking out a loan for 100 pounds, then finding that they owed ten times as much within a year. Many people who could not pay their loan back were taking out another loan wth a different payday lender, therefore compounding the problem.
The Scottish Borders Council is hoping that a network of credit unions can be established in the region to provide an alternative to the short term loans providers. Credit Unions generally charge in the region of 20 to 30% for their short term loans.