The Scottish government has announced a 12 point action plan that will be used to limit the power of payday loan companies. The purpose is to protect citizens from possible abuse.
Scotland is getting serious about limiting the activities of high street lenders. Local Government Minister Derek Mackay announced the tightening of regulations on short-term lenders, a move which is expected to strengthen local communities.
The action plan includes the following 12 points.
- Introduction of Financial Health Service: A regulator within the Financial Health Service would ensure that all lenders adhere to strict interest rate caps. The Service would also limit rollovers of loans and real-time credit reporting to reduce incidences of opening multiple payday loans the same day.
- Promotion of Credit Unions: Since credit unions offer much more affordable personal loan products, the government intends to promote those loans as better alternatives to high street loans.
- Collaborate with Financial Conduct Authority: Sharing information with the FCA is intended to further promote good practice within the industry as well as to potentially give Scottish complaints more weight with the FCA.
- Scottish Planning Policy attention: Local planning will include an impetus to prevent clustering of high street lenders and the proliferation of high-interest borrowing.
- New Legislation: Necessary amendments shall be enacted to accomplish the goals as well as the removal of certain exemptions that have been exploited.
- Regulation of Gambling: While the Scottish Government does not currently regulate gambling within its borders, a plan to assume such regulation has been enacted. It is unclear whether this point is possible without Scottish independence.
- Influence UK Gambling Policy: The Scottish Government intends to seek a greater role in influencing UK rules on gambling.
- Regulation of Betting Shops: Greater regulation of betting shops might be possible through collaboration with Local Authorities and the Gambling Commission.
- Implementation of Town Centre Action Plan: The goal is to support a healthy mix of shops and retailers to prevent districts from getting overrun by certain industries.
- Develop Social Impact Evidence: Case studies would help to provide documentation that could shape planning and development.
- Collaboration to Implement this Action Plan: Partnerships with COSLA and the Improvement Service will result in better promotion of good practice.
- Exclude Payday Lenders from SBBS and Fresh Start: New legislation prevents inclusion in business rates relief.
This action plan does not directly result in any immediate changes, other than the already implemented legislation under the last point. The purpose though is to outline detailed changes that are likely to result in:
- greater scrutiny of high street lenders,
- further restriction of anti-consumer policies, and
- reduced concentrations of high street lenders and betting shops in neighbourhoods and town centres.
It serves a bit as a wake up call to high-interest lenders and gambling businesses that damage the welfare of the communities in which they operate. More action is likely to result from this action plan in the future.