Chamber
Plenary, 01 Mar 2007
01 Mar 2007 · S2 · Plenary
Item of business
Illegal Moneylenders
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 they have no money to pay a gas bill or buy new shoes for the kids. Users of illegal lenders might have what the PFRC report colourfully describes as "chaotic lifestyles". They might have drug and alcohol or mental health problems. They are excluded from almost all other avenues of access to loans, so loan sharks step into the vacuum. Kenny MacAskill had a point when he said that Scotland has a graver problem with illegal moneylending than do most other parts of the UK, as the report says.
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.
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 they have no money to pay a gas bill or buy new shoes for the kids. Users of illegal lenders might have what the PFRC report colourfully describes as "chaotic lifestyles". They might have drug and alcohol or mental health problems. They are excluded from almost all other avenues of access to loans, so loan sharks step into the vacuum. Kenny MacAskill had a point when he said that Scotland has a graver problem with illegal moneylending than do most other parts of the UK, as the report says.
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.
In the same item of business
The Presiding Officer (Mr George Reid):
NPA
Good morning. The first item of business is a debate on motion S2M-5669, in the name of Des McNulty, on dealing with illegal moneylenders.
The Deputy Minister for Communities (Des McNulty):
Lab
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 inter...
Stewart Stevenson (Banff and Buchan) (SNP):
SNP
I join the minister in unreservedly condemning the actions of illegal moneylenders. How successful have we been, under the Proceeds of Crime Act 2002 or othe...
Des McNulty:
Lab
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 prosec...
Christine Grahame (South of Scotland) (SNP):
SNP
Now there is an admission.
Des McNulty:
Lab
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...
Mr Kenny MacAskill (Lothians) (SNP):
SNP
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 h...
Margaret Mitchell (Central Scotland) (Con):
Con
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 ille...
Mr Jamie Stone (Caithness, Sutherland and Easter Ross) (LD):
LD
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 c...
Bill Aitken (Glasgow) (Con):
Con
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 c...
Mr Stone:
LD
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 detailed and clever ...
Christine Grahame:
SNP
From the member's comments, it seems that he supports the statement in the SNP amendment about the burden that legal moneylending puts on people. Is that the...
Mr Stone:
LD
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 merit...
Trish Godman (West Renfrewshire) (Lab):
Lab
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 ...
Ms Sandra White (Glasgow) (SNP):
SNP
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...
Members:
Oh, come on!
Ms White:
SNP
Members can intervene if they wish.
Cathie Craigie (Cumbernauld and Kilsyth) (Lab):
Lab
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...
Ms White:
SNP
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 ...
Patrick Harvie (Glasgow) (Green):
Green
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 sche...
Christine May (Central Fife) (Lab):
Lab
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 Pat...
Colin Fox (Lothians) (SSP):
SSP
I wonder whether the minister is familiar with the lines that Woody Guthrie sang:"Some will rob you with a six-gunAnd some with a fountain pen."In the motion...
Mr Stone:
LD
I mentioned it.
Colin Fox:
SSP
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, yeste...
Helen Eadie (Dunfermline East) (Lab):
Lab
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...
Bill Aitken (Glasgow) (Con):
Con
Despite there being two amendments to the Executive's motion, the debate so far has been largely consensual. The Conservatives acknowledge the efforts that t...
Christine Grahame:
SNP
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 ...
Bill Aitken:
Con
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 ...
Colin Fox:
SSP
Perhaps Bill Aitken will unravel the great 21st century mystery of how the banks make their money. They lend at one rate and borrow at another. Is not that w...
Bill Aitken:
Con
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 ex...