Hansard

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 education, money advice and mechanisms to help people to manage their debt better. Indeed, I am sure that there is a broad welcome across the chamber for many of those measures. Moreover, I am keen to hear more about the task force pilots, which no doubt have a role to play.

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, which echoes Trish Godman's proposal, is already in place in several European countries and should be considered.

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.