PRESS RELEASE
December 3rd, 2008
Beware of the loan sharks, says MSP
Greenock and Inverclyde MSP Duncan McNeil has launched a campaign to caution hard-up families to stay clear of sky-high interest loans this Christmas.
The financial pressures of the festive season coupled with the ongoing credit crunch is leaving more and more families struggling to get by this year.
But Mr McNeil is calling on people not to be tempted by the lenders who prey on struggling families at this time of year.
He has teamed up with local advice group Money Matters to make people aware of the true cost of borrowing.
The MSP is targeting:
- High Street money shops, who offer high-interest loans or pay day advances with an APR rate sometimes more 1,000 per cent.
- Doorstep lenders, who employ agents to target homes with poor credit ratings offering convenient loans that are paid back in weekly instalments at a high-interest rate, typically with an APR of around 175 per cent.
- Loan sharks, who illegally loan money to those unable to gain access to other financial services and can often threaten those in debt to them with violence if they fail to make payments.
Mr McNeil has found several money shops prominently operating within his constituency while doorstep lenders could already be at work in the area.
He said: “With rising costs at home and Christmas just round the corner, many people will be feeling the pinch and some extra money up front would be welcome in most homes.
“But this is the vulnerability that these companies prey on and that is where the serious problems start.
“Debts can be spiral all too easy and you won’t get any sympathy for these companies, who only care about getting their money back.”
As part of the campaign, the MSP is backing a bill tabled in Westminster last month calling for rates to be pegged at five per cent above the Bank of England base rate – currently at 4.5 per cent.
This is in stark contrast with rates charged by some lenders, such as the Provident Personal credit company with interest rates at 183 per cent.
That would mean a loan of £300 having to be repaid at £804 in just over a year.
Mr McNeil visited local advice group Money Matters to hear himself how people are coping with rising costs during the credit crunch.
And the irresponsible lenders profiting from the financial hard times were found to be one of the main problems, according to the local advice experts.
The subject also arose during his Scottish Parliament inquiry into child poverty and was highlighted as contributing factor by Citizens Advice Scotland and the Association of British Credit Unions.
As convenor of the Local Government and Communities Committee, he hopes its report into child poverty will highlight a number of improvements to help hard-up families dodge the high-interest lenders.
The MSP warned constituents tempted by the access to easy credit so close to Christmas to think again and take advice from groups like Money Matters if they are unsure.
He said: “I have heard both locally from Money Matters and in Parliament through my committee’s inquiry into child poverty just how severe the impact of debts and high-interest loans can have on people
“This is one of the factors that are preventing struggling families from getting out of the poverty trap and I hope that this sort of practice is outlawed.
“Fortunately our area we have some excellent support and advice services, such as Money Matters, to help people out with money problems at this difficult time.
“But for advice workers to meet to meet the demand I believe they need additional funds financial support from the Scottish Government.”
ENDS