We are here this morning to discuss the problem of loan sharks. By "loan sharks" I mean those who break the law by lending money, often at extortionate interest rates, when they have no licence to do so. The law on the matter is reserved to the Westminster Parliament, because it concerns consumer credit and financial institutions, but enforcement of the law in Scotland depends on a close partnership between the Department of Trade and Industry and the devolved Administration. At the local level, it depends on close collaboration between trading standards officers, the police and the Procurator Fiscal Service.
It is in the nature of loan sharks—or illegal moneylenders—to operate secretively. They communicate their services by word of mouth and lure unwary borrowers into the trap of apparently easy credit. Victims might feel that they have nowhere else to turn because their credit history does not allow them to obtain credit from more legitimate and affordable sources. However, the outcomes of turning to a loan shark are exorbitant interest rates, demands that all too often are accompanied by threats, and a trap of growing debt from which there is often no prospect of escape. The illegal nature of the transaction means that the normal controls and safeguards are not available. Because of the secretive nature of the offence and the collusion of victims, illegal moneylending is hard to detect and the law is even harder to enforce. That is why we ask the Parliament to join us in unreservedly condemning the activities of illegal moneylenders.
We fully recognise the social problems that are faced by those who turn to illegal moneylenders. Unmanageable debt is a big problem in Scotland. In 2005-06, citizens advice bureaux in Scotland dealt with 61,587 inquiries about consumer debt—11,000 more than in 2004-05. The total recorded new client debt in 2005-06 was £212 million, which was an increase of £54 million on 2004-05.
By taking some simple steps, most people avoid allowing debt to escalate to a point at which it becomes unmanageable. The Scottish Executive has supported the development of financial education and money advice to help ordinary people to live within a limited budget. People in Scotland today have unprecedented opportunities to receive education and to find work that is appropriate to their abilities, which enables them to improve their incomes. Our economy is more buoyant than it was in the past, and we have benefited for some years from the minimum wage and from the tax credits and child care disregards that help our poorer citizens who are in work to make their income go further.
Regardless of their income, the vast majority of people obtain credit, whether it is to buy a house, a car, other goods, a holiday or whatever. Financial institutions—which are very profitable, as we saw yesterday and have seen today—offer an enormous number of consumer credit products, and many of us have mortgages, car loans, hire purchase agreements and other forms of credit. Consumer credit is at an all-time high, but most people manage to pay their debts most of the time.
Today, however, we are focusing not on those who follow legitimate routes to credit but on the plight of those who cannot, or feel that they cannot, access those routes. Women who are on welfare benefits are the most likely to fall into the hands of loan sharks. Borrowing an average sum of £250 can be the start of untold misery for such vulnerable people and their families.
We are determined to work in partnership with the United Kingdom Government to tackle illegal moneylending through enforcement and prosecution and by developing new approaches, such as the successful illegal moneylending pilots. Before talking about the pilots, however, I highlight the existing efforts by the police, the Procurator Fiscal Service and trading standards officers to enforce the law. Section 39 of the Consumer Credit Act 1974 penalises unlicensed lenders. In 2005-06, 23 reports of violations were made to the procurator fiscal, which resulted in 15 prosecutions. To date, there have been 12 trials and eight convictions. Five cases have been reported so far in 2006-07, of which three are being prosecuted and two remain under consideration.
However, new steps were needed. To provide a more intensive approach, the DTI funded two pilot enforcement projects that were run by specialist trading standards teams, one of which was based in Birmingham and covered the west midlands and the other was based in Glasgow and covered the whole of Scotland. It is to the credit of those two hard-working teams that the public profile of illegal
The two teams found that victims' willingness to identify illegal moneylenders did not always translate into a willingness to provide evidence to support a prosecution. In Scotland, only one victim in five was willing to provide a statement and few were willing to take the matter further and go to court. That is a regrettable situation, and we should try to change it.
Illegal moneylending operations in Scotland tend to be on a smaller scale than those in other parts of the UK and they tend to be embedded in local communities. That reinforces the difficulties with persuading witnesses to come forward, because they know that they will probably be identified and that they risk being targeted. So far, the criminal justice authorities in Scotland have successfully prosecuted two cases that came out of the pilot, with another six pending. In the Birmingham operation, there was greater success with prosecuting cases and securing convictions. I am confident that the Lord Advocate and my colleagues the justice ministers will consider the findings carefully with a view to putting more pressure on illegal moneylenders.
Any changes to the law of evidence in relation to reserved offences are a matter for Westminster, but I am sure that members of the Scottish Parliament will wish to comment and give their views on what would work most effectively.
Illegal moneylenders are the most unacceptable face of today's society. They exploit poor and vulnerable people who have little or no choice in how they live their lives. Their control over their victims rests on a climate of fear that protects their revenue flow and acts against the possibility of their being reporting and convicted. They use fear and knowledge to control their victims. Sadly, there are still too many victims in Scotland.
Illegal moneylenders have perhaps been able to operate with a degree of impunity, but we intend to change that. Victims have had no recourse and little confidence in the authorities. Many of them are frightened and do not know who to trust. Illegal moneylending makes a huge hole in victims' finances, exacerbates crime and antisocial behaviour, and deepens financial exclusion. We must tackle this blight on our society.
It is clear that the removal of lenders has a positive impact on victims' finances, on their quality of life and on the health of the communities in which illegal moneylending is a problem. In the pilot projects, an estimated 1,800 victims benefited from the removal of unscrupulous moneylenders, and borrowers saved, potentially, £3.3 million. Although the removal of the moneylenders is a good thing, their victims might fear that they will return or operate in other ways.
I can give the member some figures in relation to the activities of the Glasgow illegal moneylending team. To date, 500 people have benefited from the prosecution of loan sharks in Scotland and loan books that were worth about £250,000 have been shut down. Counterfeit goods to the value of £5,000 have been recovered and assets valued at £500 have been reported for consideration for forfeiture under the Proceeds of Crime Act 2002.
The problem is that victims might have no other method of borrowing, so they can fall prey to these people again. The ability to strip illegal lenders of assets amassed through illegal lending is probably the most important deterrent. It certainly sits alongside the prospect of penal sentences. An early indication from the two projects taken together is that at least £2 million has been recovered.
Illegal moneylenders prey on the most financially and socially excluded groups in society. Their interest charges are not transparent, so victims usually end up paying back much more than they borrowed—multiples of 10 times more than they borrowed. That leaches more money out of already poor families and communities. Illegal moneylenders usually operate using an implied threat of violence against those who do not pay. That leads to other forms of destructive behaviour in areas where they operate, such as theft and prostitution, as people turn to desperate means to ensure they can pay back the moneylender.
We fully intend to crack down on illegal moneylenders, but that is only half the problem. Most people who borrow from illegal moneylenders do not have any other options, or at least they do not think that they have. If a moneylender is taken out of a community, the chances are that another illegal lender could just step into their shoes.
It is therefore important that, as well as taking enforcement action against moneylenders, serious attempts are made to work with victims or potential victims to ensure that they are aware of alternative sources of credit, of which credit unions are a good example. Victims of illegal moneylenders often misunderstand their situation, and think that, because they are borrowing informally or do not have a contract, they are getting a better deal than they might do if they went to a legal lender. There is therefore a need for better financial education in communities that are targeted by illegal moneylenders, as well as a need to ensure that they are more financially included.
The Executive is striving to provide solutions for all victims, with the assistance of credit unions and money advice services, and through Citizens Advice Scotland, local authority trading standards departments and organisations that are in a position to help those with unmanageable debt.
Not all victims of illegal moneylenders present themselves to credit unions or advice services to ask for assistance, and, in some cases, credit unions might not be in a position to provide the instant access loans that people might need. Credit unions survive on their members' savings and they are required to operate under legal regulations. Although there are approximately 126 credit unions in Scotland, many are small and based in the community, and when they lend money they are lending their members' money.
Victims and potential victims of illegal moneylenders might be in their position because they have a poor credit history and are high risk. In planning for the development of services for victims within credit unions, it is important to be realistic about the different types of victim. In many cases, victims require greater and more proactive support with a greater degree of tolerance than most current credit union borrowers. Some of those who are using illegal moneylenders are currently so high risk that they simply cannot be served on any kind of legitimate commercial basis, whether by credit unions or other lenders.
Nonetheless, the Executive can find ways of supporting credit unions to assist those who are in need. Credit unions are still an effective and safe way to borrow and save money. All that they ask is that new members save with them for a set period of time to prove their ability to repay, and that inculcates good habits. I am sure that many members will want to talk about the credit unions in their areas during the debate. I would certainly like to mention Dalmuir Credit Union in my area. Over the long period of time since its establishment, it has done a terrific job in providing helpful and inclusive support for people who are in a variety of financial circumstances to help them manage their resources.
We want to make money advice free and available to everyone. The Scottish Executive is committed to funding Money Advice Scotland: a further £2 million was allocated in 2005, in addition to the £3 million that was allocated in April 2002. In total, the Scottish Executive has supported the money advice sector through local authorities to the tune of £5 million.
Money Advice Scotland is an important part of our strategy to combat financial exclusion. We are committed to supporting an increase in the quantity and quality of money advice in Scotland to clients with debt problems.
Whatever approach we take to combat illegal lending more generally, we must consider the creation of support that is based in the local community. The victims who were reached through the pilots were adamant that intelligence and confidence need to be created at local community level. They believed that longer term efforts to combat illegal lending and to create alternative forms of credit were more likely to be successful if they were developed within and by local communities. That takes us back to credit unions being one of the key ways forward.
If we form the next Administration—
I hope that the SNP will support us in Opposition. We will invite our partners, such as Citizens Advice Scotland, Money Advice Scotland and local authorities, to consider how to go further with local community development, so that vulnerable people are not thrown back on illegal lenders.
For our part, we will continue our efforts to begin financial education as early as possible in schools and in settings such as the workplace and the community. We welcome the support of financial institutions such as Lloyds TSB, which are concerned about the unbanked and those who do not access traditional forms of credit. Our aim has to be to reduce to the minimum the number of people who feel that no option is available to them to raise immediate cash. Prevention is a much better option to protect people from loan sharks, and we will do everything possible to reduce the demand. However, I am quite clear: we will also take the appropriate enforcement steps to deal with those people who prey on the poorest and most vulnerable people in our communities.
That the Parliament condemns the activities of illegal money lenders who prey on and exploit vulnerable individuals and communities; welcomes the Scottish Executive's determination to work in partnership with the UK Government to tackle illegal lending through enforcement and by developing new approaches, such as
In moving the amendment in my name, I say that we do not disagree with anything that the minister said. Clearly, the Executive is flagging up an issue that has been a considerable problem in Scotland for far too long. I will return to many of the points that the minister made.
However, Scotland has additional problems that we have to recognise. First, there is a distinctive debt problem that is worse in Scotland than elsewhere in the UK, and we have to take that on board and address it. Secondly, I am reminded of the Donald Rumsfeld phrase about known unknowns and unknown unknowns, because as well as illegal moneylending we have legal moneylending, which, even if it is not illegal, is predatory—the phrase that the minister used—and immoral. We have to address that point. We cannot simply deal with the spivs and wide boys who are operating illegally as loan sharks in our schemes; we have to address the legitimate companies that are a bigger problem in our society. We need to tackle consumer credit legislation and the threats that were brought in—wrongly, we believe—under the Bankruptcy and Diligence etc (Scotland) Act 2007.
The minister is quite correct when he says that loan sharking, as it is often described, is not some form of social service—it never has been. Those of us who have read Jimmy Boyle's biography know that it is not some benign act of kindness with a higher rate of interest than is available from a high street bank. It is related to organised crime and is tied in with criminal gangs and drugs. Even in Mr Boyle's day, moneylending was related to violence, intimidation, slashings and broken arms and legs. It was unacceptable then and it is equally unacceptable now. It is social evil that we must tackle.
As the minister has pointed out, the police and the Crown Office and Procurator Fiscal Service need to have the laws and resources to address the problem. We must stamp out those who prey on individuals who, for whatever reason, find themselves going to moneylenders. Whether someone has lost their wage packet or giro, or whether they have spent or squandered it, as happens in some cases, we have to protect
We are not just talking about legal enforcement, as the minister correctly pointed out. Credit unions are one way of addressing the problem, especially in areas of poverty and multiple debt where high street banks—despite their huge profits, such as those that have been announced recently—are no longer prepared to provide a service when there are bigger pickings to be made elsewhere, including through predatory lending. Where they are not prepared to service areas, credit unions are required.
In members' business debates, the minister rightly has contrasted the situation with the one in the Republic of Ireland, where the credit union system is historically far better developed. There are good reasons for that. We need to drive our system further and faster.
Money advice must be made available. There must be attitudinal change in Scotland. We have dined out on the reputation of the thrifty Scots, and sometimes we have resented the implication that we have short arms and deep pockets. However, Scotland prided itself on being a nation in which there was not simply probity but some element of thrift. Now we find ourselves in a significant situation: we are more in debt than people south of the border. As I will go on to say, some of the reasons for that are understandable, but we must warn people against getting into debt. We also have to legislate sometimes to protect people from themselves. Some might say that that is the nanny state, but sometimes we require a nanny state to protect people from their own stupidity. It is a matter of balance. Given the levels of debt and the need to stop people being taken to the cleaners either by illegal or legal loan sharks, action needs to be taken.
In the SNP amendment, we state that the problem in Scotland is worse than elsewhere in the UK. The most recent statistics are clear—the average Scot's unsecured borrowing now amounts to £7,848, which is 31 per cent more than the UK average. That is unsecured borrowing rather than being mortgaged to the hilt.
When I embarked on my career as a young solicitor, we were told that if someone wanted to borrow money to buy property they could have two and a half times their wages. Now, people are borrowing four or five times their wages. They are also borrowing to get the initial deposit. Given the level of secured and unsecured borrowing in our society and what might happen to interest rates, a considerable problem could come back to haunt us. That is why we require to address debt.
Part of the solution is attitudinal change. We live in a world in which many more consumer and
The problem comes back to the fact that although illegal moneylenders and loan sharks need to be stamped out, predatory lending is also a significant problem in Scotland. Many predatory lenders are front companies, sometimes making vast profits for the major high street banks. They operate by postcode targeting, and target areas in which they know people are desperate for a variety of goods. One of the common tactics is to work with car dealers and offer people a variety of vehicles for £999 and instant funding. They say, "You can have this vehicle. Take which one you want and we will lend you £999." Of course, they do not point out that the interest rate is not 80 per cent or 90 per cent but sometimes 100 per cent or 140 per cent. Predatory lenders know that it is not 5 per cent or 10 per cent of debt that will go bad and be called in but upwards of 40 per cent. They then repossess the car and take whatever action is necessary.
We need to take action against predatory lenders who deliberately target postcode areas, whether in Edinburgh or Glasgow and whether they work with car dealers or other high street retailers. Such lenders target vulnerable people, often in the run-up to Christmas. We saw the problems that befell people involved with Farepak. Even when people are involved with legitimate companies, they find themselves unprotected by consumer credit legislation when things go wrong. We have a distinctive problem in Scotland that is not being addressed adequately by consumer credit legislation from Westminster and it needs to be tackled. That applies to companies such as Farepak, but more so to the predatory lending of a variety of companies, some of which, sadly, are front companies for major high street retailers.
This Parliament has to address the consequences of debt. We have to deal with the matrimonial problems, the crime problems, suicides and all the health problems that are a result of debt wearing people down. They turn in on themselves, they turn to alcohol or drugs, or they turn on and beat the wife. The problems of debt become magnified. Although we have to address the consequences of debt, we do not have the power to address the causes. This Parliament cannot properly address the needs and requirements of our people until such time as we can address adequately the causes as well as the consequences. Until such time as we can do that, we will be letting our people down.
Last year, this Parliament passed the Bankruptcy and Diligence etc (Scotland) Bill. We fully agreed that a great deal of its provisions were necessary. The law in Scotland was out of date and we needed to move it forward. However, in terms of section 185, we allowed for a land attachment order to be attached to somebody's principal dwelling house. That was the reason why we voted against the bill, notwithstanding the huge array of provisions that we recognised would be beneficial. We knew and we said so in Parliament that land attachment orders would be used by predatory lenders. We knew that those high street companies would say to individuals, "You have a debt of £3,000. If you do not pay it, we will take your house through a land attachment order." We accept that in many instances such orders may be used as a threat rather than as a reality, but the threat remains. The Jimmy Boyles of this world threatened to slash people's faces or break their legs. Many of the predatory high street companies will seek to take back their money at huge interest rates, such as 80 per cent, 90 per cent or 100 per cent, and they will do so by threatening to take away family homes.
The only way in which to address the problem is to remove the threat of someone's house being taken from them by a land attachment order. That is why this Parliament must commit to repeal that provision of the Bankruptcy and Diligence etc (Scotland) Act 2007. We do not need to use primary legislation; it can be done by ministerial edict. The Scottish National Party has committed to so doing when we are the Administration.
I move amendment S2M-5669.1, to leave out from "welcomes" to end and insert:
"notes the significant debt problem in Scotland, a problem that is more serious than in the rest of the United Kingdom; recognises that a main cause of Scotland's debt crisis is the irresponsible actions of legal money lenders; believes that the causes as well as the consequences of unmanageable debt must be addressed; regrets that current consumer legislation at Westminster is inadequate in protecting vulnerable groups from predatory lending; calls for the Parliament to have appropriate powers to deal with Scotland's distinct debt problem, and further calls for the removal of dwelling homes from the land attachment method of debt recovery, thereby ending the draconian situation of a person's home being at risk over a small amount of debt."
I very much welcome this important debate, which focuses on what has become a huge problem throughout the UK—namely, consumer debt and the activities of illegal moneylenders or loan sharks, who prey on some of the most vulnerable in society and cause immense misery.
The full extent of the problem associated with personal debt and financial exclusion can be graphically illustrated by the following stark statistics. Including mortgage debt, total consumer debt in the UK is more than £1.2 trillion, an amount that is larger than the UK's annual gross domestic product. Britain's personal debt increases by approximately £1 million every four minutes. To put that in context, the average UK consumer owes over 200 per cent more than the average western European.
There is little doubt that the easy access to credit offered by major credit card companies contributes to the level of personal debt. Such offers are invariably unsolicited and irresponsible. As a result, there are 31.6 million credit card holders in the UK today, with every person having an average of 2.4 cards, which in turn means that there are more credit cards than people. The average interest rate on credit card lending is currently 15.72 per cent—a staggering 11 per cent, approximately, above the base rate.
As more people attempt to manage existing debt by accessing new credit, it is not difficult to see how their debt spirals out of control. Hence, insolvencies are up by 55 per cent in the current quarter, in comparison with the same period in 2005, and they are estimated to top 100,000 for the entire year. Furthermore, the average age of a bankrupt has fallen from 43 to 41 in the past four years and the proportion of young bankrupts, aged between 18 and 29, has more than doubled.
Given those sobering statistics and the fact that, according to a recent Financial Services Authority survey, 62 per cent of young people admitted that if they had money problems or debt they would not be able to name any advice or support service to which they could turn, it is clear that here is fertile ground for loan sharks.
Illegal moneylenders operate without a credit licence. According to recent research commissioned by the DTI, their victims fall into two main categories. The first category contains the credit impaired and represents about a third of the victims—people who have chaotic lifestyles associated with drug or alcohol abuse, who might work occasionally, but who have systematically slipped down the credit ladder.
The second category is that of the credit excluded, which contains about two thirds of the victims. These are people who are unable to access mainstream credit for a number of reasons. They are usually on benefits and are among the most vulnerable people in society.
The DTI has responded to the problem positively and effectively by setting up an illegal lending enforcement pilot project, which has been allocated £2.6 million over two and a half years,
The subsequent DTI evaluation highlights areas of policy for which the Liberal-Labour pact must assume responsibility and in which it must play its part. This is the aspect of illegal lending that my amendment covers. The evaluation emphasises that effective relationships with key partners must be in place and stresses that the police have a pivotal role. It is therefore crucial that adequate police capacity and powers are available to ensure proper enforcement. As the minister said, the removal of loan sharks involves significant police resources and manpower, so there are major resource implications. However, the pact's commitment to ensuring that that resource is in place will always be in doubt as long as it continues to dedicate precious funds to employing community wardens rather than full-time police officers, as wardens do not have sufficient powers to deal with loan sharks or to give the public the confidence to report illegal moneylending without fear of reprisals. It is also essential to ensure that credit unions have sufficient capacity to offer instant loans and to manage high-risk borrowers.
Tackling personal debt and financial exclusion is an issue of social responsibility—we are all in it together. Government must ensure that we have fair and proportionate regulation; that consumer protection is in place; and that financial education and financial inclusion are promoted. If supervised attendance orders were available as a first disposal in the justice of the peace courts, that would go some way towards ensuring that potential victims of loan sharks could access money management services as soon as possible. Individuals must act responsibly and take into consideration the consequences of borrowing and spending. Civic society, charities and non-governmental organisations should be encouraged to devise innovative local solutions that address local issues in a way that centralised services cannot. Crucially, business must provide important financial advice and training that illustrates how
Government, civic society and business must therefore all work in partnership and play their part in tackling personal debt and financial exclusion. My amendment acknowledges that fact whereas, by contrast, the Scottish National Party amendment is divisive.
I move amendment S2M-5669.2, to insert at end:
"recognises that an increase in the number of police walking our streets would encourage and give people more confidence to report the activities of illegal money lenders in local communities, and believes that tackling personal debt and financial exclusion is an issue of social responsibility."
The debate is a worthwhile one. I am indebted to the Rev Graham Blount for all his work on the issue. He is known to all of us, and is the secretary of the cross-party group in the Scottish Parliament on tackling debt, which I co-convene with Jackie Baillie.
"A longstanding concern has been that those on the lowest incomes pay the most for credit. This means that when borrowing is unavoidable—for example when a major household appliance breaks down—the costs to those least able to pay is actually the greatest. For example: ... a 70 year old retired woman with a loan running an APR of 246% or ... a female client with mental health problems with a loan running at an APR of 177%; and ... a lone parent owing £500 to one lender, who negotiated reduced payments of £20 per month. After interest and charges only 15 pence was going towards the debt."
Members have given similar examples.
I am sorry that Margaret Mitchell did not elaborate further on the notion in her amendment about police on the streets. I do not dismiss her amendment but, as Jeremy Purvis said to me, it is not as if moneylenders have stalls on the streets. The form of police work that is involved is much more intensive than simply having policemen on the beat. However, the issue is worth discussing.
Is Mr Stone aware that much of the collection, intimidation and threatening behaviour that illegal moneylenders carry out is done on the streets and street corners? Does he agree that the presence of police would act as a deterrent to that?
I take that point, but my point is that those activities are not overt, but covert. The police work that is involved has to be much more
"We applaud the progress made by the Scottish Illegal Moneylending Unit in combating exploitation in Scotland's poorest communities ... But cracking down on loan sharks still begs an awkward question - how else do people on low incomes access credit? No-one deliberately goes to a loan shark from choice. They go because it's their only option. With no collateral or guarantors, the legitimate lenders usually aren't interested in them.
What the poor need is more access to affordable credit - not for profligate lifestyles but to allow them just some measure of the financial breathing space the rest of us enjoy. Liberalising the rules for the government's Social Fund and continuing the expansion of the credit-union sector would help."
Des McNulty referred to credit unions. I regret very much that, despite my attempts before I became a member of the Scottish Parliament to establish a credit union in the south of my constituency in Invergordon, the project failed. At that time, when I was a councillor, I became convinced about the excellent work that credit unions do. However, as has been said, the caveat is that when people need instant access to credit for a sum of money to get them out of a hole, the process is not as swift as it could be.
The main thrust of what I want to say is about the clearing banks, which Margaret Mitchell touched on. We must examine why people end up going to loan sharks. Mention has been made of the multiple credit cards that people have. We all get mailshots offering new credit cards. If anyone is an aficionado of Sue Townsend's fictitious character Adrian Mole, they will know that one of her most recent books contains an accurate description of how people get caught in the multiple credit card and multiple borrowing trap. I recommend that book to colleagues, as it has the finest description of that process that I have read and illustrates perfectly what happens to some of the poorest people in our society.
If we compare today's standard clearing banks in Scotland, Ireland or wherever with those that existed when I was a young man, we find that things have changed and that the benevolent bank manager who kept an eye on his clients is a thing of the past. That is in no way a shot at the people who work behind counters in our banks, who are doing their best, but the issue is that they have targets that they have been told to get to grips with. When an ordinary customer tries to access credit from a bank, friendly advice is often not available across the counter in the way in which it used to be. Our banks must rise to that challenge. The failure to give advice to some of the poorest people and the failure to give them credit and then
I am attracted to the SNP amendment, but the trouble is that I do not support separation, as I have said elsewhere. The motion and both amendments have merits, and it is useful that this debate is taking place and that members are expressing such views. I sincerely hope that the banks will sit up and take notice of what has been said in the debate.
I also hope that members will consider the availability of credit and how our clearing banks are behaving. A huge amount could be done to tackle the source of the problem if those institutions had slightly more socially aware policies. My God, it would not take much from the huge profits that have been announced in recent days to sort out the problem.
Some time ago—in 2002, I think—I was fortunate enough to secure a members' business debate on loan sharks. The Daily Record was running a campaign to expose the squalid activities of loan sharks in poor communities throughout Scotland and I was pleased to support that campaign, as others were. I am pleased that I am taking part in today's debate, in which we can get an overview of the progress that has been made since then.
We all have a duty to ensure that everyone has access to the social security housing benefits to which they are entitled. Welfare rights officers, citizens advice bureaux and independent advice centres play a vital role in the process, and action against illegal moneylenders is vital. The full weight of the law must be brought to bear on loan sharks. From what the minister said, it is clear that we are beginning to address the cycle of disadvantage and poverty and to promote financial and social inclusion.
I am sure that members agree that there should be a cap on excessive interest rates. Irresponsible lending by companies that have no intention of seeing debts paid off but want to keep people in debt for ever and a day must be eliminated.
We must rid ourselves of the disgraceful notion that the poor will always be with us. Our aim should be to change an environment of debt and poverty into an environment of civil rights and empowerment.
Credit unions, such as the excellent credit union in Port Glasgow in my constituency, form one of the strongest defences against illegal moneylending. They have a positive history of service in disadvantaged communities. I was pleased that the minister explained "Unlocking the Potential—An Action Plan for the Credit Union Movement in Scotland", which aims to help grow that movement and ensure that financial services are available to everyone. A partnership with local authorities, Scottish banks, voluntary organisations and Communities Scotland can only be good news.
In Renfrewshire, a pilot scheme links money advice with the pathways to work programme—that, too, can only be good. There are also money advice pilots for people with mental health problems, people with learning difficulties, young people, lone parents and ethnic minorities, all of whom have been identified as facing barriers to accessing mainstream money advice. We should consider one-stop shops in which local people in need can obtain local government, voluntary organisation, Scottish Parliament and Westminster Parliament services.
Often, education is the solution that we apply to deeply rooted social problems. That is the right thing to do—certain practical programmes ought to be woven into the curriculum to help young people understand money, debt, benefits and credit issues and how to handle resources.
Where do bankers, small businesspeople, trade unions and voluntary and community organisations that are not directly involved with money advice stand on debt and loan sharks? The minister is going some way towards creating structures that will allow those people and organisations to engage constructively in the process and ensure that we eliminate the cancer of crippling personal debt. Unfortunately, Scotland does not have the experience of Canada or Australia, where credit unions are significant financial institutions. Work-based and community-based credit unions have an important role to play in an annual summit in Australia that calls together all the financial institutions, moneylending companies, banks and credit unions. The minister should consider that experience.
It has been said that there is an obvious link between loan sharks and drug dealers in many constituencies. Indeed, a loan shark is often also a drug dealer. I would like more action to be taken against their supplying drugs and their arrangements to extort even more money from the communities that they assault.
The fundamental issue in this debate is the Executive's determination to tackle poverty and assist people to get out of the grip of debt. A holistic approach to the problem that involves
We have come some way since the debate in 2002, but there is still a long way to go. I still fear that people's unopened bills will sit behind clocks and that when they think that they can do nothing else, they will walk down the street, go up a close and knock on a loan shark's door. However, I am encouraged by what the minister said. Illegal moneylenders are a cancer in our communities. We have started to address the problem, but there is still some way to go.
The minister said that the debate is about loan sharks—illegal moneylenders who do not have a licence to lend money. However, does he believe that it is okay for so-called legal moneylenders—credit companies and banks—to charge extortionate interest rates for credit, mortgages and so on? Surely, by his own admission, those moneylenders must also be considered.
Many forms of loan shark have been mentioned. In that context, I want to talk about my personal, first-hand experience from when I worked in various areas in Glasgow and Paisley. I want members to know how moneylenders operate. When I worked in the east end of Glasgow, there was a shop—which I will not name—that kept family allowance books in a drawer. Therefore, families or mothers had to use that shop. The prices were extortionate, but it was the only shop that they could use. That was one form of moneylending. Obviously, there were terrible consequences for the families that were involved and for the community at large.
In Paisley, long queues of moneylenders would wait outside post offices to take money or benefits from people collecting their money or benefits. The police were eventually called.
Those are two examples from my first-hand experience of illegal moneylenders or loan sharks, but such things still happen today. Money is taken from people not only on street corners, but in front of shops and post offices, and families are left destitute. They have no money left for clothes, food or anything else. I welcome the figures that
Credit unions, citizens advice bureaux, Money Advice Scotland and other organisations have been mentioned. I agree that those organisations do an invaluable job and I welcome the loan-shark hunters—I think that that is what they are called—because we need to protect people from illegal moneylending, which can have terrible consequences for them.
I turn to the Scottish National Party's amendment. Kenny McAskill was right about the effects of the Bankruptcy and Diligence etc (Scotland) Act 2007. People's houses can be taken off them as a result of debts of as little as £3,000. Sometimes the debt will not even be of their own making. I will give an example. Hundreds of people are being taken to court for debts of between £3,000 and £7,000 relating to bills for repairs to their houses. I am sure that the minister knows what I am going to say next. Those people did not ask for the repairs to be done, they did not want them to be done and they could not afford them. However, Glasgow Housing Association, which the Labour Government set up, is taking them to court.
The GHA is a predatory company. It insists that people pay for things within a year and says that, as it is a charitable institution, it cannot afford to extend payment periods. Even Communities Scotland has said that that is not the case. Will the minister, in summing up or in an intervention, confirm to people who are suffering under the GHA that that is not the case? The GHA is taking people to court to pay back money within a year, which may lead to bankruptcies. People could lose their homes under legislation that the Labour Government passed.
The minister cited Lloyds Bank as an example of a good creditor. However, the funny thing is that that is the very bank that the GHA advises people to go to for the £5,000, £6,000 or £7,000 loan that they need to pay back GHA because it has refused to extend payment periods. I am not one for conspiracy theories, but I certainly want the minister to clarify that point.
We must deal not only with illegal but with legal moneylenders. By that, I mean not just banks and credit companies but what I would call the Executive's own illegal moneylenders, such as Glasgow Housing Association, which is putting people into debt.
If we take the member's argument to its logical conclusion, is the SNP saying that it would make tenants pay for repairs to owner-occupiers' houses? Does she expect tenants to sit with water pouring through their roofs because owner-occupiers will not pay their way?
Owner-occupiers are quite happy to pay for repairs to their homes, but they simply cannot afford to pay £7,000 within a year. I want the minister to clarify that point. The member talks about repairs, but I know of one case in Cardonald in Glasgow in which apex roofs were going to be put on houses. When a survey was carried out, it became clear that if those so-called repairs were carried out, the roofs would fall in. That is the kind of workmanship that I am talking about. The whole project has been disbanded, and those flat-roofed houses will remain flat-roofed. The member should get her facts right.
The Labour Government needs to do something about this problem. Mr McNulty might well shake his head, but he should go along to some of the meetings that I have attended with 250 people who desperately want to pay but who cannot do so within a year. They are being made bankrupt because of the Government's policy and ideology, and I want the minister to clarify the whole issue.
I welcome the opportunity to debate this issue. However, I struggled to find any information about issues such as credit unions and the debt arrangement scheme on the Scottish Executive's website. Indeed, after 10 minutes of searching, I found only one reference to illegal moneylending, so it might be useful if more information were to be made available not just to members, but to the public.
In his opening speech, Des McNulty defined loan sharks as people who lure unwary borrowers into easy credit. He mentioned exorbitant interest rates and appalling practices involving harassment and violence, and highlighted the consequences of unmanageable debt. He also talked about how £250 might be borrowed to pay off an unexpected debt. That led me to recall Scott Barrie's members' business debate last night, which touched on Scottish Power's back-charging of prepayment meters. The £250 that is borrowed to pay off that kind of debt can easily spark off a spiral of debt that can go out of control; in some cases, that £250 might become a four or even five-figure debt within a short space of time.
I am very happy to answer Des McNulty's call and join in his condemnation of illegal moneylenders. I welcome the Executive's support of credit unions and its work on financial
However, I want to highlight two further issues, the first of which is the unhealthy trend towards the general social acceptability of substantial amounts of debt through the enormous mortgages that some have taken on, through credit cards, or through loans from illegal or legal moneylenders.
The SNP amendment touches on the second issue that I want to raise, which relates to legal moneylending. Although we should certainly join in condemning illegal moneylenders, we should recognise that they are only one part of the problem. Irresponsible legal moneylending is at least as much of a problem. For example, all the criticisms that Des McNulty made of illegal moneylending could equally be levelled at the so-called subprime lending sector.
Provident Financial is perhaps the best-known UK example of a company that provides such credit. Its pitch of providing immediate, no-questions-asked cash on the doorstep is specifically targeted at low-income households, and very often leads to repayments that are nothing short of extortionate. One single mother who borrowed £200 was required to pay back £300 over 30 weeks. When she got into trouble with the payments, the same agent immediately offered her a second loan of £500 to settle the debt and cover some additional expenses. The interest on that loan, which was to be paid over 54 weeks, amounted to £310. Again, difficulties arose, and a loan of £1,000 was offered, which was to be paid back over 54 weeks at interest rates equating to about 170 per cent. The debt spiralled and spiralled until, at the end of the year, it had reached more than £7,000, an amount that the woman had no realistic prospect of repaying.
The subprime lending sector and its huge profits are in no way subject to the same kind of criminal penalties and sanctions that Des McNulty outlined and which we would all support for the illegal sector. Indeed, far from it. The UK Government has simply not addressed the problem of legal providers and predators—and I reinforce the point that, in this instance, I am talking not about the Glasgow Housing Association, but about subprime credit providers, who are free under legislation to continue to do very nicely, thanks very much, out of people's poverty.
In that context, I commend to members the New Economics Foundation's publication, "Profiting from Poverty: Why debt is big business in Britain", which recommends a cap on the interest rates that can be charged on such loans. That measure,
At the moment, shared legal actions against companies are not permitted in this country. However, there is a wide range of reasons why we should be open to the idea of class actions and of enabling borrowers to make joint complaints against companies such as subprime lenders.
Finally, it does not make sense that while the rest of the financial services sector pays for its own regulation, the public sector pays for the regulation of credit. In effect, that amounts to state subsidy of the credit industry.
Members have mentioned many other proposals with regard to credit unions and have highlighted a range of other measures on which communities and the public sector can work together to address the problems. However, I am forced to agree with much of the tone of the SNP's amendment, which does not, as Jamie Stone seemed to imply, hang on the idea of independence. Those who support or oppose independence can have that disagreement, but no matter whether we believe in devolution or federalism, we need to resolve the current split in which we have responsibility for debt issues but not for credit issues. Even if members want devolution to continue instead of choosing another option that some of us support, we should at least re-examine the area.
Members have made some very good speeches on an issue that we are all concerned about, even if we have slightly different views on how to solve it.
Unlike Patrick Harvie, I managed to find information on the subject quite easily on the internet. In the UK, the total value of advances made by illegal moneylenders has been estimated at £40 million per annum, whereas repayments to those lenders are of the order of £120 million per annum. I am sure that, like me, many members watched "Dragons' Den" last night. If so, they would have seen the dragons decline to invest on the ground that they would not get a decent return on their investment from what was on offer. The dragons would kill for a return like that. I use the word "kill" deliberately, given that that is what many illegal moneylenders do to their clients—if not in actuality, then virtually.
We can only guess at the effect of borrowing from illegal moneylenders. In my efforts to find out the scale of the problem in my constituency, I discovered the difficulty of doing so. The activities are performed illegally and under cover, in back closes and wherever else. They are about terrifying people and taking control, a lack of clarity
During the passage of the Bankruptcy and Diligence etc (Scotland) Bill, we heard evidence from the citizens advice bureaux and Money Advice Scotland, and from money advisers in my constituency. We heard horror stories about the tactics that are employed by legal money lenders—the banks, the Provi and other such lenders, as members have described in the debate. The witnesses talked about people getting calls on their mobile phones at three, four and five o'clock in the morning. They also spoke of the intimidation of families in which the debtor was in hospital for an operation—the lender would call family members and say, "We don't believe you. Get him to the phone now or we are coming round." I heard evidence that illegal moneylenders' enforcement tactics can include furniture being tossed over balconies and set on fire—even, on one instance, an individual being tossed over a balcony. I heard of broken limbs and people driven almost to suicide. Debtors' children can be threatened on the way home from school and, even with all the security measures that are in place, benefit books are still being taken and kept. Whether or not we control the credit end and can deal only with enforcement, we must be concerned about that. Indeed, the minister said that he was working with Westminster colleagues to deal with some of those issues.
The Executive has sought to put solutions in place. For example, there are the changes to the way in which debt is dealt with, particularly for the no-income-no-asset group, with the passing of the Bankruptcy and Diligence etc (Scotland) Act 2007. There are also the improvements to the debt arrangement scheme, with the freezing of debt at the point at which the DAS is made, access to advice and help, and representation in court by money advisers. I am aware that some colleagues have difficulty with the land attachment element of the act. However, the minister not only gave guarantees on the way in which the provision would be used, but made a commitment to review implementation, including a promise to come back to the chamber.
Jackie Baillie and I did a considerable amount of work, together with the minister, on credit unions. I congratulate Johann Lamont on her work as Deputy Minister for Communities in that regard. Johann Lamont, who is a fellow member of the Scottish Co-operative Party, introduced expanded powers for credit unions in order that they could more easily offer loans to members, including loans with a shorter savings time. Credit unions
Much has been done. I agree with Trish Godman and Patrick Harvie that a cap on interest rates would go a considerable way to preventing people from falling into the hands of illegal moneylenders. However, such a cap would not help everybody; those who find themselves needing to go to illegal moneylenders often tend to be the sort of individuals to whom we would not lend money, easily or readily, because of their inability to repay. It is essential that we deal with poverty and its causes, and deprivation in terms of jobs and educational attainment. That is the wider policy framework within which the Executive and the Government at Westminster are working. That is what we need to support.
From the briefings that I have received and from reading the DTI report, I note the evidence from the pilots that suggests that a time lag will emerge between getting rid of the illegal moneylenders and introducing alternatives. In the minister's summing up, I ask her to discuss some of the areas in which the Executive hopes to shorten that gap. Any gap in the availability of credit is likely to let in the next criminal.
I have pleasure in supporting the Executive motion. I hope that all members will support it at decision time.
"Some will rob you with a six-gun
And some with a fountain pen."
In the motion that is before the Parliament, the Executive is right to condemn the activities of illegal moneylenders; I am sure that that is agreed across the board. However, I also have some concerns about the practices of quite a few of the legal moneylenders; other members have hinted that they have such concerns. I am a bit surprised that no member has yet made a stronger connection between the illegal moneylending that the debate is centred around and the exorbitant profits and profit taking that the two biggest banks in this country have announced over the past two days. The minister mentioned that, but he underplayed it.
Mr Stone also mentioned it, but he underplayed it, too. I will tell members why.
Today, the Royal Bank of Scotland declared profits of £9.7 billion and, yesterday, HBOS—the Halifax and Bank of Scotland—declared profits of £5.7 billion. In each case, profits were up about 15 per cent on the past year. Whichever minister replies on behalf of the Executive ought to reassure the Parliament that ministers will address the issue and protect customers from such profiteering. Members have spoken about the loan sharks' rates of interest, and it is right that we should do so, as those rates are both disgraceful and outrageous. However, the rates of interest that the banks charge on the high street are also outrageous. Credit card repayment rates can be in excess of 30 per cent. All the banks operate exorbitant rates and declare outrageous profits, based on exploitation of their customers.
It concerns me—if that is not an understatement—that HBOS has announced a profit of £5.7 billion only a few weeks after the Parliament debated, and raised concerns about, the role that HBOS played in the Farepak scandal. Part of the money that HBOS had in its vaults—clearly, the money was part of the profit that the bank has just declared—was £40 million of Farepak customers' money.
The focus of today's debate is on those whom the minister at the DTI described, rightly, as the scum who are illegal moneylenders. As other members have said, that term is far too benign—the term "loan shark" is a better way of describing those who have a viciousness to their trade and who bring terrible suffering to vulnerable people. However, although we are debating illegal moneylending, we should not absolve the many legal moneylenders whose reputation is often only marginally better.
It is right that members should talk with some colour about the moneylenders who prey on and exploit the vulnerable in our communities. Vulnerable individuals are intimidated by thuggery and threats of violence, and forced to settle debts that they cannot afford to settle. They are forced to enter into illegal, vicious transactions that often involve drug dealing and sexual exploitation. It is right that we consider the debate in that context.
The link between illegal moneylending and poverty is highlighted in a report that I was given by the PFRC—I am not sure what the letters stand for—which shows that, in the poorest areas of Britain, 50 per cent of the population admitted to using legal home credit lenders over the past five years and 6 per cent admitted to using illegal moneylenders. People who cannot get credit from the high street banks, or even through home credit lenders, are the ones who turn in desperation to the loan sharks.
Users of illegal lenders are often women on benefits who face an immediate crisis because
The prosecution of loan sharks is only half the battle, as is rightly suggested in the motion. My impression is that the criminal justice system has not given sufficiently high priority to tackling illegal moneylending in communities. The police have not taken seriously enough the need to detect illegal moneylending activities. Margaret Mitchell mentioned the figures on prosecutions, which are pretty small given the size and nature of the problem. I welcome plans to enforce the law properly—if they are serious—so that illegal loan sharks are removed from communities, and I take comfort from the work of the Glasgow illegal moneylending team and the task force that has been set up under the auspices of the DTI. It is right to pursue the prosecution of loan sharks.
Members were right to acknowledge the valuable service of citizens advice bureaux in providing help and financial information and inspiration to people, to help them to overcome serious debt problems. However, although there is improved access to money advice, it is important to note that CABx are closing throughout the country.
Prosecution and information provision are only half the battle. We must also provide an alternative source of funds, so that people do not have to go to illegal moneylenders in the first place. I am a big supporter of credit unions, which do a brilliant job and should be developed. However, a credit union is not the first place to which a person is likely to turn in a crisis. Social lending should be expanded. There should be targeted social fund lending, community care grants and other such measures.
Is the minister aware of the Accent Group's pilot community investment scheme in East Lancashire? Accent is underwriting credit union loans so that borrowers can receive money immediately, rather than wait 12 weeks for a loan in line with credit union rules. Accent's interest rate is 1 per cent per month and the scheme is funded through social provision. I understand that the pilot in East Lancashire has been a considerable success and I hope that the minister will say whether there are plans to introduce such a scheme in Scotland, where it is needed.
Trish Godman was right when she said that we need a holistic approach. We will not solve people's difficulties with loan sharks simply by treating the issue as a credit problem and setting up repayment programmes. The problem is far more severe and complex and a holistic approach is required in which people are provided not just with another source of credit but with another life entirely. We need to address the underlying reasons why people get into trouble with loan sharks, which means that we must provide universal health care, tackle poverty and drug problems and give meaningful assistance to people who are socially marginalised and, all too often, excluded from aspects of life that we take for granted.
I join the minister in condemning illegal moneylenders unreservedly. He was right to say that there are many threads in the strategy to tackle the issue. The Parliament should give clear, focused support to the measures that he outlined.
Like the minister, I congratulate Her Majesty's Government on its major effort to address a serious problem for individuals and society by establishing pilot projects in which regional teams, funded by the DTI, tackle the challenge of illegal moneylending. I declare an interest, as a Co-operative Party and Labour Party member of the Parliament.
Credit unions play a vital role in Scotland and I pay tribute to everyone who has struggled for their development in the UK—the struggle has not been easy. In particular, I applaud the work of credit unions in Dunfermline East, in Benarty, Cowdenbeath and Rosyth. I take issue with Colin Fox's comment about credit unions: people in my constituency are learning that credit unions can give them a sympathetic hearing and practical help. In America, Canada and elsewhere, credit unions are a major business—the White House has its own credit union.
Education and debt advice are key elements of a strategy to tackle illegal moneylending. I agree whole-heartedly with everything that Trish Godman said and particularly with her point about the need for one-stop shops. It should be an urgent priority for the Scottish Executive to establish such facilities in Scotland's most deprived areas.
Credit unions alone cannot tackle the problem, so a key issue for policy makers is how we determine the most effective form of alternative social lending. It has been suggested that, if we are to combat illegal lending and provide affordable credit on the most disadvantaged
Relatively small loans with initially affordable repayments can escalate and become unmanageable, ultra-high-cost debts. Individual cases illustrate the financial cost of borrowing from an illegal lender. In a typical case in Scotland, Mrs A borrowed an average amount—£300—and was told that she would have to repay £680, in instalments of £20 per week. When she missed some repayments, the lender added £300 to her debt. From her witness statement, it appears that after paying at least £780—more than two and a half times the original loan amount—the lender told her that she still owed £220. In the event, the lender was arrested and she did not have to pay the additional amount. The total cost of the credit was £700, at a staggering APR of 1,669 per cent.
During the debate we heard about highly coercive lenders—the loan sharks of popular imagination—who exploit their victims and are often violent, as Christine May said, and whose lending operations are frequently aligned with criminal activity. We know most about that category of lenders, which suggests that their operations represent the most prevalent model of illegal lending. Although there is considerable variation in the scale of lending and in involvement in criminal activity, such lenders share a common aim: they want a regular flow of income from borrowers over as long a period as possible. They do not want loans to be repaid; they want to carry on getting £30 to £40 per week from borrowers.
Studies have shown that illegal lending is linked with drug dealing and other criminal activity. Trading standards officers report that many lenders have a criminal lifestyle and are involved in activities ranging from fraud and burglary to prostitution. Illegal lending can be a means of recycling the proceeds of criminal activity and facilitating other such activity, for example when people who are in payment difficulties are recruited into drug dealing, shoplifting and even prostitution. The extreme end of illegal lending reportedly involves organised crime or even paramilitary organisations.
We have to consider the impact of illegal lenders on the communities in which they operate. Payments to illegal lenders can hollow out already stretched budgets to the point at which essentials are forgone. The escalation of debt and of weekly payments by means of penalty charges and roll-over loans can put a severe strain on borrowers'
I will have no hesitation in supporting today's motion from the Scottish Executive. I applaud everyone's efforts to tackle what has to be the most crucial issue that we all have to deal with in our constituencies.
Despite there being two amendments to the Executive's motion, the debate so far has been largely consensual. The Conservatives acknowledge the efforts that the Department of Trade and Industry has made in addressing the problem of illegal moneylending—a problem that pervades certain sections of our society and afflicts the most vulnerable and at-risk people. For many credit-impaired and credit-excluded people, the problem continues a spiral deeper and deeper into debt. We welcome what has been done to date, but we know that more remains to be done.
We have a responsibility to rectify the curse of illegal moneylending. For example, we must intervene earlier when people are in financial difficulty, rather than wait until they are forced into borrowing money illegally from the loan sharks who prey on the most vulnerable people. To be frank, what we are talking about is gangsterism at its most unrefined and crude. Violence is often threatened, as Kenny MacAskill said, and it seems that even today tallymen such as there were in the 1960s are still abroad and operating in the streets of our cities, without remorse and, in many cases, without being detected and prosecuted. That is the primary issue that must be tackled expeditiously and vigorously.
We have to eradicate the culture of loan sharks, which, as I say, threatens a very vulnerable section of society. That culture is flourishing on Britain's increasing amount of personal debt—which, as Margaret Mitchell said, increases by a staggering £1 million every four minutes. The culture is also flourishing on the staggering increase in financial insolvencies, which are widely expected to top 100,000 across the UK in 2007. There is also a culture of crime that is flourishing on the lack of financial education that has
Pilot programmes have been effective in establishing relationships with law enforcement officers in order to crack down on loan sharks, but the pilots are failing to establish effective partnerships with money advisory groups and credit unions, which do such a good job in assisting people who are in debt. It is of the utmost importance that we work with those sectors to ensure that the victims of illegal moneylending are able to work towards solvency and are not forced back into resorting to illegal methods. We must encourage those sectors, which too often are overburdened, so that they are able to offer constructive solutions to individuals' problems.
Businesses have to take a much more active role in providing unbiased and premium advice and training on personal finance. I have listened with interest to much of what has been said today; for example, from his perspective, Colin Fox was quite right to point out the massive sums that the banks have made, although it appears that the vast majority of those profits have been raised not from personal borrowers but from wider aspects of 21st century banking. Nonetheless, we have to consider interest rates and the free availability of credit, although if we do that, we will interfere with other aspects of the economic equation and there will be consequences. That argument is, perhaps, for another day.
I am interested to know how we can interfere with interest rates when we do not have the powers to do so in this Parliament. Is Mr Aitken suggesting that we should have those powers?
No—that is not what I am suggesting. I was careful in what I said so that no one would think that I was suggesting that. I was simply pointing out arguments that have been advanced and suggesting that there would be consequences to our interfering with interest rates and with the availability of credit. From perspectives such as Colin Fox's, a case can be argued for such interference, but the political and economic consequences might be unacceptable. Members must bear that firmly in mind. As I said, that is an argument for another day and, obviously, for another place. We will see what transpires.
Perhaps Bill Aitken will unravel the great 21 st century mystery of how the banks make their money. They lend at one rate and borrow at another. Is not that what banking is? Is not that why their profits are so huge? They have
That was a rather simplistic argument. On the basis of the equation that Colin Fox advances, the money that the banks make has not been made, to any great extent, from personal borrowers, but from commercial borrowers, which does not really come under the terms of today's debate.
We have to consider education: we have to look to schools to give youngsters better advice on financial borrowing and on every other aspect of their financial affairs. We could do a lot better in that respect.
As I have suggested, the people who engage in illegal moneylending are despicable. A number of members have highlighted how such people use violence, how they use the drug industry to advance the financial aspects of their criminal activity and how people are coerced and threatened and have their families threatened in order to ensure repayments. We must combat that. As Margaret Mitchell correctly said, not enough is being done on policing and enforcement. We will have to look into that.
I said earlier that there is consensus in the chamber—the Conservatives will not oppose the Executive's motion—but I hope that, in the future, more constructive and more determined methods will be adopted to combat this growing evil.
I am pleased to speak in this morning's debate—not only to praise the Executive for taking action to deal with illegal moneylenders but, more particularly, to highlight the support that we are giving to positive alternatives to loan sharks and financial exclusion.
I am proud of our commitment to, and the positive impact of, our money advice network, our local authority financial and welfare advisers, our citizens advice bureaux and, most important, our credit unions. Scotland has a long and much-admired tradition of innovation in establishing organisations to deal with the problems of credit and debt, and of providing support to the more financially vulnerable people in our communities.
I recently took advantage of an offer—made, I think, to all MSPs—to meet the staff and management at one of my local branches of Lloyds TSB, in Barrhead. I had an especially encouraging and enlightening discussion with regional manager Alistair McManus, who reminded me of the bank's history and origins. As I am sure many members know, the TSB was
However, it is unfortunately also the case that, despite that good will, too many people are denied access to high street banks, sources of reliable credit and the advantages—if not the everyday necessity—of having a bank account, and suffer from the problems of such financial exclusion. I do not know how many members share my slightly ambivalent feelings about our banks. I am fiercely proud of the way our Scottish banks have performed on the world stage—they have shown themselves to be incredibly successful and competitive businesses and are hugely important to the Scottish economy—but at the same time I worry about the customers that we may have left behind and the communities that we may have deserted. It is not illegal moneylenders alone who have stepped into that breach, but the semi-legal cheque-cashing operations that operate from shops on many main streets, and organisations such as the Provident, which Patrick Harvie mentioned, that charge up to 100 per cent APR and take advantage of our most vulnerable citizens.
That is why I am pleased that the credit union movement has in recent years been able to expand so much to serve people who are financially excluded. It is particularly noteworthy that, during the recent collapse of Farepak, the credit unions in East Renfrewshire and, I believe, in Bridgeton in Glasgow—in Frank McAveety's constituency—stepped in to help local residents who were in difficulty and to set an example of local people coming together to pool resources and save money in a secure place.
The Executive's support for credit unions has been warmly welcomed and has helped their expansion. In my area, it helped to provide a shop front on a main street store for East Renfrewshire Credit Union. It has also helped the credit union to take on a more diverse group of shareholders from financially excluded people to professional people who use a credit union because of the principles that the credit union upholds—I imagine that many of the MSPs who are present would be included in that number. Services are also being expanded: credit unions are seeking to help difficult-to-reach groups or individuals, such as homeless people, and to provide insurance schemes for funeral services.
Alongside the credit unions are the advisory services that Money Advice Scotland, the local authorities or the citizens advice bureaux provide. I can speak highly of all those services in my area,
I have one word of caution for the minister on the operation of the Bankruptcy and Diligence etc (Scotland) Act 2007: anecdotal evidence suggests that some unprincipled individuals are taking advantage of the new debt arrangement schemes to run up huge debts with no intention of ever repaying them, but are instead declaring themselves bankrupt. For organisations that operate with a socially responsible ethos, such as the credit unions, that can be a particularly difficult and unfair burden to bear. I hope that the minister will reassure me that her officials are monitoring the situation closely.
I also make an appeal—which, I am sure, will be familiar to the minister—for core funding for organisations such as the citizens advice bureaux. Colin Fox made the same point earlier. I know how much work the East Renfrewshire CAB does for financially excluded people. Debt problems account for a huge proportion of CAB caseload, but the bureaux themselves exist on a less than secure financial footing.
I am pleased that we come from a country that has a long history of innovation in financial organisations and which has a particularly strong record of supporting those who are worst off, financially excluded and most vulnerable. I am delighted that the Executive is maintaining that tradition with a range of measures to protect our communities from exploitation by unscrupulous people.
I draw members' attention to entries in the voluntary part of my register of interests. I suspect that I am the only member who came to the Parliament in an effort to reduce the public opprobrium that my pervious profession attracted—for 30 years, I was employed in a bank, albeit in a computing capacity rather than as a banker.
I will address one issue that has not, I am slightly surprised to note, been developed to any great extent, although Colin Fox referred to it tangentially. No one has picked up on the DTI research that says:
"The profile of those using illegal lenders is similar to that of home credit users in that most"—
I emphasise "most"—
"users are female, with families, and are aged 30-40."
In other words, there is an equality issue at the heart of the matter besides all the other issues and we should tak tent of that in our consideration of it. Throughout Scotland, it is largely women who keep families together, so if women are differentially subjected to the evil trade of illegal moneylending, it undermines family life.
I do not necessarily disagree with the evidence that Stewart Stevenson has presented, but does he also appreciate that, when microcredit—which has been highly successful—has gone directly to women or when the women are in control of budgeting, the management of family finances is much better than in families in which much of the income is managed by the men?
That is spot on. However, there is a vicious circle: poverty creates debt which creates poverty. All members should recognise and support the efforts that have been made to break that cycle, but we must also acknowledge that we have created a debt-driven society and have normalised debt as a part of life. In less sophisticated economies, the attitude among the poor is different. The people with the best credit rating in the world live in the squatter camps of South Africa. Traditionally, they are not exposed to debt and desperately try to ensure that they always repay their debts. To some extent, the problem has been driven by wealthy people who have used debt over the years, and has spread to people in other parts of society.
I am not Adrian Mole—like Jamie Stone, I am an adult. The people who use illegal moneylenders represent 0.44 per cent of the adult population, but 3 per cent of low-income households and 6 per cent of households in the most deprived areas. That compares to the figure of 2.3 million users of high-cost licensed home-credit lenders in the UK, which is 6.15 per cent of the adult population. The DTI also says:
"On the most deprived estates, 50% of residents have used home credit lenders within the last 5 years."
It estimates that the total that is owed to illegal moneylenders is £40 million or, with repayments, £120 million, so the numbers are big and worrying. I hope that people tak tent of that fact.
Patricia Hewitt said:
"Illegal money lenders, who are unlicensed ..., are commonly referred to as loan sharks. These loan sharks not only take advantage of vulnerable lenders but also bring disrepute to legitimate lenders".
To be blunt, the legitimate lenders will have to live with that, because they are not at the core of the argument.
I am disappointed that, despite our efforts, we have so far made only comparatively modest inroads into tackling illegal moneylending. I note that the DTI's report on the pilot enforcement schemes says that
"9 cases ... have been dealt with by way of formal cautions" because they were very much at the low end of the offence and only two cases have been brought to court, with a further six in the pipeline. I am not sure why that leads Cathy Jamieson to say that we should have super-antisocial behaviour orders for illegal moneylending. If it is a crime, we should prosecute it as such. I do not understand where the obsession with ASBOs comes from.
I will turn to an important point. In the DTI's research, there is a little table that shows the connection that users of illegal lenders have with formal banking in one shape or another. It shows that about 50 per cent of all residents in the UK have a bank account, but that only about 10 per cent of users of illegal lenders have one. The really interesting thing is that more than 80 per cent of the people who use illegal lenders have a Post Office card account. It is their connection with the formal financial system but that is precisely the card that it is proposed should be abolished. Those people ain't gonna go to the banks—it is not part of their tradition, and they are uncomfortable with banks. If the Executive ministers could do one constructive thing, it might be to persuade their colleagues at Westminster not to proceed with the winding-up of the Post Office card account. That will simply not help.
Colin Fox referred to the problems of the people who use illegal lenders. The DTI has shown that three in 10 are users of drugs or alcohol or have mental health problems. At the core of the matter—I hope that the pilot schemes have tackled this—is reluctance to report the problem. The DTI report shows that 85 per cent of people would never report illegal lending.
I make the simple point that the lending of money is behind big advertising bucks. In every paper, we see adverts for the lending of money. They focus on interest rates but, for most people, interest rates do not actually mean very much. The banks should be forced to start telling people not what the interest rate is, but what they will have to repay. People can understand that, and it would help them to understand the differences between using formal licensed lending and going to illegal sources of money.
The bottom line is that we expect the most from the people who have the least. The financial management skills of members, cushioned as we are from the need to manage our wallets precisely down to the last penny, would be wholly inadequate for the challenge that many people in
A few weeks ago, I attended the funeral of a family friend. As people do when they get together at such times, members of the older generations shared reminiscences of times gone by, as they looked back on the life of the one who had departed. The names of people long since gone tripped off the tongues of the assembled mourners. "Do you remember Such-and-such, the chemist?" one asked. "What about that Mr So-and-so, who had the corner shop?" They even remembered my own great-grandfather, who owned the yard behind the Crown Bar in Holytown. Someone went on to say, "What was the name of the moneylender who lived down the miners' rows? What a character he was. He saved many a wean from starving. Mind you, you didn't want to cross him." Today, we hear about the same moneylenders and we agree that they operate in a culture of fear. They think that they are above the law. They are the lowest form of social vulture, and they are involved in criminality that is among the worst forms of antisocial behaviour that affects our communities today, but their predecessors can be remembered almost with fondness by decent people who living in the communities in which they used to operate. I was staggered to hear that. I had to interject and point out that we also used to send children up chimneys and send girls down the pits. They were not the good old days. There I was, listening to people who were talking as though they thought that moneylenders today were different from the ones they knew in their youth. I asked them, and the consensus was that there was a difference—"That was then; this is now." The moneylender of their day was a member of the community, a necessary evil. The ones who lend money now, however, are viewed as gangsters, thugs and the lowest forms of scum.
I was reminded that there were no credit unions then, which is a significant point to acknowledge. That brought home to me just how important the credit union movement is in our modern society. No longer are the people to whom I have referred prepared to accept the illegal moneylender, no matter how much they might have tolerated them previously. They do not see the need for people to go to illegal moneylenders because of that difference: the credit unions. They understand that communities need to work together to prevent people who are in need from putting themselves at the mercy of today's criminal element, and they look to their credit union for that.
Today, the provision of personal finance services, with access to low-cost flexible loans and secure savings facilities via credit unions makes absolute sense to us all. It seems that we now have to do more to ensure that that vital service becomes more widely available. We need to increase choice and access to a range of more appropriate financial products that are suitable for people on low incomes, as other members have said in the debate.
One thing is certain in this life: we will all go out in a box. Sometime hence, people will sit around, reminiscing about this period, as I heard people doing a few weeks ago. I doubt that they will remember with any affection our moneylenders of today—I hope that they do not. Moneylenders should be a thing of the past—a distant memory—if we get it right. Much work has been done to bring that about and, if we put further development of credit unions at the core of our efforts to bring financial assistance to the poorer sections of our society, we can build on the good start that has been made, which is helping bring about the much-needed change in our attitudes to illegal moneylenders. I commend the Executive for its work, particularly its work to support our credit unions, and I look forward with confidence to the results of the latest assistance that it has provided.
I remember joining the then Deputy Minister for Communities, Johann Lamont, a year or so ago, when she came to a credit union in Newarthill to launch one of the new innovative support mechanisms that the Scottish Executive had introduced to ensure that the credit unions that most of our communities now take for granted were given the support that they needed to continue the work that most people now recognise they do.
I also praise the Scottish ministers for working with ministers at Westminster in targeting resources directly at the criminals. As has already been said this morning, those are the people we are dealing with. We are not dealing with fly-by-nights who just happen to find themselves in a community where they can use their skills to make a quick buck; rather, we are talking about organised gangs of criminals who target poor people and communities. They must be dealt with as they are—as criminals. They prey on vulnerable families and they drag them further into financial and social problems, as other members have said. They have to be challenged—the minister is right to do so and to have secured this morning's debate. It has been a good debate, and I hope that, by the time we conclude it, we will have arrived at a consensus. Credit unions are fundamental to the attack on the problem, but much work still has to be done.
I am lucky to represent the constituency that has the lowest level of personal debt in mainland Scotland. The Scottish Borders is second only to Shetland in that regard, on the basis of information that was provided by the Bank of Scotland last year. I alluded to one of the reasons for that in my intervention on Stewart Stevenson. There is a long tradition of women workers in the Borders mills—they were central to financing of families. They bore much greater responsibility for finances and they had a much greater recognition of debt and its impact on family finances.
At the start of his speech, the Deputy Minister for Communities said that the debate was concerned with extortion. It is clearly so. It is also clearly a cross-border, cross-authority issue. The UK Government, the Scottish Executive, local authorities, Scottish police and prosecutors must work together to ensure a joined-up response to what is an insidious, but sophisticated, business. In many cases, it is an illegal business.
I will touch on some of the wider aspects of the issue, rather than just the illegal trade. Many members have spoken about legal moneylending, and I will touch on that later.
It is. As far as the legal aspects are concerned, however, the international boundaries are very clear. That is one reason why I am rejecting the siren calls of the SNP amendment. Legal moneylending is international.
On the other hand, the illegal practices relating to street moneylending are extremely local and are an issue for the police in Scotland. The minister outlined the record of prosecutions in Scotland. Most members will accept that considerably more work needs to be done. One of the problems is the climate of fear around illegal moneylending. Fear surrounds borrowing and repaying money and it surrounds any investigations into the issue. As members have said, loan sharks encourage and thrive on a climate of fear that makes prosecutions difficult because victims and witnesses are too terrified to come forward. Loan sharks also create
I appreciate Stewart Stevenson's point about ASBOs, but I think that the minister's suggestion could be a creative use of ASBOs, because it would place a lesser onus on victims and witnesses to come forward and would allow a civil process to cease the trade. Members have pointed to some successes in that regard, such as the DTI's project to combat loan sharks in Glasgow, which benefited some 500 people. The pilot scheme that was set up by the DTI in 2004 has shut down loan books that were worth more than £250,000, but the project has been handicapped by difficulties arising from witnesses' being unwilling to appear in court or who cannot, because of pressure, be relied on to do so. That is an area in which the work that the Scottish Executive has done on protecting witnesses and making it easier for them to come forward has to be joined with the work of local authorities.
Other positive work has been done. For example, credit unions can offer home insurance and bill-payment accounts to their members, the financial inclusion plan gives people more control over their finances and greater access to advice, and there have been schemes such as save by the bell in Dundee, which teaches school pupils the importance of saving and budgeting, which is important. In the Borders, I have worked with Citizens Advice Scotland on a project that gets young people who are leaving school to sit down and think about family budgeting and explains basic elements of personal finances such as what a rental agreement or a mobile phone agreement looks like.
We acknowledge the work that our financial sector has done in Wester Hailes in Edinburgh and the partnerships that HBOS is developing. However, as Jamie Stone and others said, more needs to be done. The support of the large banks for microcredit schemes, as well as public sector involvement, can be significant. The Grameen Bank, a microcredit scheme that lifts thousands of people out of poverty by offering low-interest loans in a transparent and accountable way, shows one way in which we can remove the mystique from credit.
All parties in the chamber recognise that the most financially vulnerable people often pay more for credit than those who do not require credit. Hire-purchase agreements became the acceptable face of credit in the second half of the previous century. The culture shift of which they were part opened up opportunities to purchase for thousands of Scots and, today, as Kenny MacAskill said, the availability of legal credit has
The House of Commons Treasury Committee published an excellent report in November that scrutinised access to financial services. In the 1950s, people who paid for products through hire-purchase schemes paid more than those who did not. Today, only 30 per cent of customers of the Royal Bank of Scotland who have a basic bank account pay their utility bills by direct debit because they do not want to lose an extra degree of control over their bank account, with no buffer, and—of course—they do not benefit from the discounts that that form of payment attracts.
The Treasury Committee also recommended that the UK Government actively support the development of credit-union based transactional bank accounts as an alternative to basic bank accounts in areas of financial exclusion.
Although the Government has indicated that there will be a successor to the Post Office card account, there is considerable uncertainty about what form it will take and whether it will provide the same level of support—or, indeed, more support—for the most vulnerable people.
There are many issues in the realm of legal moneylending that Parliament would want to address, but there is a fine line between legitimate lenders who employ what we might consider to be immoral practices, and illegal lenders. Both types of lender need to be addressed. We can do so by using the new powers for supporting witnesses, we can ensure that the Scottish crime and drug enforcement agency has a greater role in the more organised element of moneylending and we can ensure that all parts of the public sector do much more to offer support to those who are financially insecure and to ensure that there is proper prosecution of, and a robust approach towards, illegal moneylending.
I cannot disagree with much of what has been said already. Illegal moneylending is a growing blight on our society and must be stopped. Under the Labour Government, debt has rocketed. Personal debt in the UK now outstrips our GDP—quite something for the fifth-largest economy in the world. Insolvencies and the number of credit cards
Scotland is experiencing a debt crisis that, often, results in the most vulnerable being harmed and the weakest being exploited. Television advertisements encourage vulnerable adults to put up their homes as security and are used to publicise firms that take on customers with bad debt records. I am sure that we have all seen the advertisement in which someone phones an 0800 number and is told that they can borrow £15,000. That is fine, but how and when will it be paid back? On that basis, I do not disagree with the SNP's amendment. Legal lending is creating the problem.
When legal lending fails, illegal moneylenders step in. An economy based on debt will eventually implode. A system of lending that is based on exploiting the poor will inhibit social mobility. We have developed into a "live now, pay later" society in which savers are few and ever increasing numbers of people are terrified victims of loan sharks.
I appreciate the minister's comments and I am pleased that the Executive is focusing on the issue. However, is the Executive doing too little, too late? I agree with joint working with the police, but the fear of recriminations prevails. The removal of illegal lenders is the only solution. Personal debt and social exclusion go hand in hand and should be tackled in tandem. Counselling must be readily available and, accordingly, I support the excellent work that is done by credit unions, which must be more actively promoted. I also agree with Colin Fox's point about the importance of citizens advice bureaux.
The Scottish Conservatives recognise the need for early intervention when financial problems occur. Such intervention will deal with the situation at the root level and will bypass the unscrupulous moneylenders who are willing to prey on the vulnerable.
It is one thing to introduce new laws, but we need to examine the legal system. As Bill Aitken and Margaret Mitchell rightly say, we must reverse the drop in the number of police on the streets. We must also consider the increased use of undercover police, as a lot of the illegal activities that are related to moneylending take place behind closed doors and up closes. We must also tackle repeat offending and consider the ineffectiveness of some of the community sentences.
It is all very well for the Executive to make new commitments and promises but, if the legal system is failing, how are we to deal with the criminal activities of illegal moneylenders? The Executive needs to realise what the knock-on effects of its
I agree with Kenny MacAskill and Jamie Stone that credit is too easy to secure from not only banks, but supermarkets and internet providers—that is not to mention the plethora of companies using television advertising. For example, Abbey offers mortgages at fives times someone's salary. If the interest rates go up by 0.5 per cent, they cannot afford it.
Let us consider the annual percentage rate on electrical goods in well-known high street stores. Someone can go round five or six stores in one day, pick up a separate credit card in each store and run up £400 or £500 credit in the same day. It is no wonder that people, at the end of their tether, resort to whatever access is available to finance. Using one credit card to pay off another also gets people into a terrible debt trap—it is all too easy.
We live in an ever more consumer-led society and money is being thrown at people. That is too often the beginning of a slippery slope. If legal lending was more responsibly managed, loan sharks would, I hope, disappear. Once vulnerable individuals are sucked into the vicious circle of personal debt, it can all too easily spiral out of control.
All too often, current policies are not helping the poorest in our society, but working against them. The poorest families pay, proportionally, the highest tax and unscrupulous moneylenders too often step into the vacuum and offer to help them make it back.
It is not utter rubbish.
In a society where social responsibility is actively promoted in communities, business, civil society and, as Bill Aitken said, education, we must go back to education and start from the grass roots. Learning how to manage finance, we should be able to create more secure and fairer communities.
In conclusion, we must renew our efforts to eliminate this scourge on our society before vulnerable individuals and families lose everything. We will, accordingly, support the Executive's motion as amended, I hope, by the amendment in Margaret Mitchell's name.
Presiding Officer, when you indicated that I
Whatever our constitutional position, we must accept that, to tackle the problem, we have to examine the causes, many of which are reserved: consumer credit, advertising legislation and the culture of credit and borrowing that pervades contemporary society. Gone are the days when my worthy mother saved up to buy something and dad came home with a record player, for example, to rounds of applause. That was how we did it then—we did not buy now and pay later. That has changed, and we cannot turn back the clock, but we must look at how we deal with the situation and prevent the problems from spiralling out of control.
In Parliament, we deal with the consequences of those causes: debt recovery, which I will touch on, deprivation, matrimonial problems—which Kenny MacAskill mentioned—alcoholism, violence and crime. Many a relationship breaks up because of rows about money problems.
Like others, I applaud the work of citizens advice bureaux. I used to be a volunteer lawyer for a bureau, and most queries were about consumer debt. I support what was said by—I may miss some members out—Ken Macintosh and Colin Fox about core funding for the bureaux. It is the place where people go at the last minute, with a writ or letter demanding payment in their hand. When they are asked when they are due in court, they say, "Tomorrow". The bureaux are on the street, so people can walk in and get a stay of execution.
I also applaud the work of credit unions—I am a saving member of a credit union. I have always felt that the name is a bit difficult and I have raised the point before. I do not know whether they need to rebrand themselves to help more people understand exactly what they do, which is what the old TSB used to do before it became a profit-making bank like the others.
I thank Stewart Stevenson for that suggestion, and I will forget what he said earlier about me and the length of my speech.
I want also to remark on the post office card account, which must be supported. We all know that there are threats to shut some of our rural post offices. If that is done, it will mean that there is no bank in those places either. There is a huge issue of access to services for people both in
The money advice scheme is also a good idea, but I do not think that it is working as it should. In part, that is because of the shortage of accredited advisers. I know that there are none in the Scottish Borders, so we cannot have money advice schemes there. I hope that the minister will address that point.
Education was rightly touched on by others, including Bill Aitken. We have a generation of children who sometimes never see cash. We know how easy it is to pay by putting a card into a machine and getting a slip—the pain is later. We have a generation of children who not only have credit being thrown at them, but do not actually see the money coming out of their purses when they spend it, leaving only 10p pieces or whatever. That is a big issue for schools. How will such education be timetabled—in either primary or secondary schools—with the current emphasis on various subjects? There is no easy solution.
We heard graphic descriptions of loan sharks from Christine May—they are sinister, insidious and ruthless. Frankly, I do not think that the solution is simply more police in the community. There is a huge problem with fear and victimisation. Word gets around like wildfire, and comments are made like, "You're the one who shopped him." Although I welcome pilot schemes and would agree with a cap on interest rates as mentioned by Christine May, we cannot do that from this Parliament.
Does Christine Grahame accept that that is not our sole proposal for a solution to the problem, but that it is crucial? If we do not have adequate numbers of police on the streets to whom people can report and who can deal with what are very dangerous people, it does not matter how many laws we pass—they will make no difference.
If people are desperate to go to loan sharks, they will go to them. We will just drive them behind even more closed doors and into more alleyways.
"that tackling personal debt and financial exclusion is an issue of social responsibility".
That looks like waffle to me.
The way to get rid of loan sharks is to make them redundant. That brings us back to reserved matters, and I want to return to advertising, which was mentioned by Mr Petrie and others. We are in a must-have culture: we must have something now, whether or not it is needed. Offers to borrow
As has been mentioned, a lack of affordable housing is driving people to borrow four or five times their income. All that needs to happen is for a couple to split or someone to become ill, and that house, like a pack of cards, tumbles down around them. They may not have enough equity to pay off the loans, and they may be left with a personal debt. That causes homelessness and is another issue to consider.
My colleague Kenny MacAskill mentioned predatory lending. I mentioned the unsolicited mail, but let us look at the consolidated loan companies. We see their adverts on afternoon television, and there is one that I particularly despise. It shows a lady smiling while she is talking on the phone. Her son cannot find his skateboard or roller skates, so the dad is looking for them as well. There is a homely conversation going on, with genteel domestic chaos. In the middle of that, the woman says, "£25,000? Yes, that'll be good," as if that is all that it means to borrow £25,000. The adverts do not say out loud that the loan is secured against their home. I would love to see the Parliament tackle that and ban those adverts, but unfortunately we cannot.
I must address land attachments, which are a big mistake. My colleague Kenny MacAskill said that the average personal debt in Scotland is £7,000-plus, but a land attachment needs a debt of just £3,000. I will consider the principle that operates. If I want to borrow £10,000 as a secured debt, I know what I am doing; I take legal advice, a legal document is drawn up to secure the debt against my property and the interest rates that I pay reflect that—they will be 6 or 7 per cent over 10, 20 or 30 years.
However, if I take out an unsecured loan of £4,000 and I do not repay it, it will transmogrify into a secured debt—a land attachment. That is although I never had a legal document at the time of contracting that said that that would happen and the interest rates that I am paying—20, 30, 40, 50 or 60 per cent—reflect that. That is unjust and it flies in the face of contract law, because when someone contracts to do something, they should know the duties and obligations, which are not known in the situation that I described. The Deputy Minister for Communities talked about guarantees that this or that will not happen, but they cannot be given. That situation will be a sword of Damocles
All those issues come to bear.
No, because I am in my last minute. Many of us—not just SNP members—who have been here for eight years, or four years, are becoming exasperated by knowing what we are dealing with but not having the tools to eradicate endemic poverty. When we get rid of endemic poverty, we get rid of loan sharks. [ Interruption. ] Someone rightly said that that is trite. Only the rich can afford credit.
If people were concerned about our friend Christine Grahame speaking for too long, I hate to think what the reaction is to my having 13 minutes. I shall sort it by speaking slowly, rather than trying to be too controversial.
The fact that communities and justice ministers organised the debate and acknowledged its importance is a symbolic and a practical expression of the important joint work that must be done to deal with illegal moneylenders. We need not only to examine the particulars of illegal moneylending but to understand the important message to which Christine May referred: that the driving force of the Scottish Executive's and the Scottish Parliament's commitments to deal with the issue should be addressing poverty, disadvantage and deprivation. That should be at the core of all the Executive's and the Parliament's work.
The terrible injustices and brutalities of illegal moneylending can be explained by how poverty is experienced in our communities. That is precisely why we must put that experience into the context of talking about the development of a stable economy and supporting the creation of jobs and full employment and joining that with shared prosperity throughout our communities. Many people are in favour of the strong economy, but they are perhaps not as committed to the consequence of that, which is the entitlement and right of all to share prosperity and to share and
We must understand the geography of poverty, the impact of multiple deprivation and the impact on families of living in a community in which people must access illegal moneylenders, even if they do not do so. We must understand more what happens to the most vulnerable people in our most vulnerable communities. That is why we need to continue the hard, unpublicised and difficult work and the day-to-day small successes of addressing employability, supporting people who have drug problems and dealing with the nitty-gritty of people's chaotic lifestyles and the impact that they have on communities and individuals.
We must understand that illegal moneylending is not just about income and that poverty and deprivation are not simply about income. Different families who have the same money coming into the house can experience life differently because of how that money is spent, the family's priorities and the pressures on the family. We need to understand why and how illegal moneylenders thrive in poor communities and their link to poverty and exclusion if we are to address the problem.
I am sure that I am not only the member who has been shocked by the distress that very small amounts of debt have caused somebody who has come to a surgery. I still remember that somebody who came to me was highly distressed at owing less than £200, because that had massive consequences for their life, health and capacity to find a way out. It is also a shock that poorer communities are the most seriously affected.
We recognise the credit unions' critical role, which Trish Godman mentioned. One critical aspect of credit unions for the broader community is that they are wise about saving. They offer people wise words rather than false hope. They say that there is nothing for nothing and that people who sensibly and logically manage and save their money before taking a loan are less likely to get into trouble.
I understand what Christine Grahame says about the name "credit union", but the state did not invent credit unions and perhaps we should leave it to the credit union movement to decide what it should be called. We could not invent credit unions, but communities did and understood their importance.
The Scottish Executive has led the charge and done important work to support credit unions because of what they bring to the table. Through allowing loan guarantee funds from services of general economic interest, we have afforded credit unions the opportunity to offer a wider range of
My colleague Des McNulty mentioned the credit union in his area and it would be remiss of me not to mention Pollok Credit Union, which creatively addresses need every week in its community, most recently through selling white goods at reasonable rates and taking out the high street lenders that offer those goods at extortionate prices. We know the importance of credit unions and that they do a critical job of financial education for the broader community.
Credit unions also offer the intelligence and understanding of the volunteers who work in them. Credit unions and the broader voluntary sector bring to the table not just the capacity to talk to individuals, but an understanding of the experience locally. They offer communities trust. I had the privilege of attending the 25th anniversary celebration of the Scottish Transport Credit Union, which I think started with a tenner a head from half a dozen shop stewards who worked on the buses. That credit union offered someone to stand next to people who had a crisis or a difficulty to offer a bit of wisdom and advice and to support them.
Michael McMahon talked about the credit union in his area and I have had the privilege of going to Newarthill. An issue exists with funding for the voluntary sector, but Newarthill Credit Union has a beautiful building and not one coin from the public purse went towards building it. That is because the people who started in a back room to address the situation and to support communities worked in a businesslike way. In understanding what is happening in the community, it is important to recognise that bit of the voluntary sector, but I do not gainsay the significance of what was said about core funding.
Patrick Harvie mentioned that the social acceptability of debt is unhealthy. A broader issue is the idea that people can have something now without having to plan, which involves an interesting argument. However, the reality is that the victims of illegal moneylenders are not people who overstretched themselves with massive mortgages, but people who are trying to cope with small and unpredictable events, such as a funeral, a birthday party or a school trip.
It is important to address the general issues of debt and unnecessary debt and to address education. Kenny MacAskill implied that if the Parliament does not deal with the inappropriate offering of credit by the financial sector, it will somehow not be addressed. As our motion says, it is possible to work with Westminster, local authorities and a range of partnerships to tackle
Is it not the case that the Westminster Parliament recently passed consumer credit legislation that was substantial and was intended to set the scene for a long time to come, yet has failed to address subprime lending or predatory lending? The chance was given to Westminster, but Westminster failed. I am unaware of any proposals to instigate change to address subprime and predatory lending. Perhaps the minister can enlighten me.
That seems to be more about the political argument than about where the responsibility lies. It is about the colour of the political commitment rather than whether the Scottish Parliament has the power to act. The work that has been done by John McFall and others to challenge and address the financial sector has been significant.
I welcome the minister's response. It is vacuous nonsense to suggest that we have a monopoly on caring about these problems and that Westminster does not share that responsibility. It is disappointing that I have to say this in a debate that has been genuinely consensual, but does the minister agree that the fundamental problem with the SNP's reasoning in suggesting yet another constitutional solution to a problem that we can address here is that it tries to shift the blame and responsibility elsewhere? Given the fact that we can do something here, and given that we owe it to the individuals who are directly affected to take responsibility for these problems, is it not wrong to try to shift that responsibility elsewhere, as if it is someone else's fault?
Clearly, there is a constitutional argument. However, I believe that the last answer that poor communities and people who are challenged with unmanageable debt require is a constitutional answer. What they need is practical action to deliver for them.
Education is important in preventing people from getting into debt problems; however, the reality is that the poor and the most vulnerable are the least likely to have access to that education. They are also less likely to have the confidence to go to organisations such as Money Advice Scotland and Citizens Advice Scotland, which would give them support. In my previous job, I met people who voluntarily helped people to enter debt arrangement schemes or to consolidate their debts. Ironically, those people would rather do
The other side of the issue is about enforcement and the commitment of the police. We have a record number of police officers, and there is an important role for them; however, we must also understand how enforcement is experienced by individuals, as was mentioned earlier. It is not just about policing; it is about challenging the police to work with local communities. It is about the way in which they police, the way in which they listen to people and the way in which they take evidence.
When we look at the differences in enforcement between Scotland and England, we must think hard about what it is in our legal system that makes enforcement and prosecution more difficult here. Perhaps we must move from a position of certainty and ask some hard questions about that. As Jeremy Purvis says, there is the opportunity for approaches such as the use of ASBOs to prevent behaviour and activities that blight our communities without making witnesses vulnerable. Perhaps we need to be more imaginative in that regard.
Colin Fox talked about community development finance initiatives. An approach is being taken in Glasgow that addresses that issue, giving loans in a more accessible way.
There is a huge argument about the tension between owner-occupiers and tenants in the Glasgow Housing Association, and there needs to be a creative solution to the problem. Indeed, constituents have raised that issue with me. Nevertheless, the idea that the GHA, as a social landlord, is the equivalent of an illegal moneylender is absolutely ludicrous. It diminishes the argument about illegal moneylending and it diminishes the argument that owner-occupiers are currently pursuing with the GHA.
We need a range of approaches. We have changed the DAS to make it more attractive. However, we recognise that people are not coming forward and that we do not have people training in the same way. There are a huge number of initiatives from a range of organisations—including some banks that take an ethical approach.
I urge members to support the motion and, critically, to support an approach to the Executive's priorities that is about supporting a strong economy and insisting that, side by side with that, that prosperity should be shared. For the most vulnerable communities, there has to be local activity and work that supports their particular needs and the organisations that work with them. That is why, later today, Des McNulty and I will