An action plan designed to limit the number of payday lenders operating on the high street has been launched by the Scottish government.
The plan will impose tighter regulations and stricter planning procedures on lenders.
It was drawn up at the Payday Lending Summit held in Glasgow earlier this year, while in attendance were local authorities, advice services, welfare organisations and credit unions.
There are currently an estimated 180 to 200 payday lenders currently operating on Scotland’s high streets.
Derek Mackay, local government minister, said: “Payday loan companies are not only blighting our high streets but they are exposing people to financial credit they just cannot afford.
“I won’t pretend that this action plan will solve the problem overnight but it’s a step in the right direction.”
High street payday lenders will be excluded from small business bonus schemes, while they will also face similar charges to betting shops.
The plan also sees the launch of the Financial Health Website, which will provide consumers with all the information and advice they need on debt and borrowing in one place.
Mackay added: “We’re taking steps to tackle the issue of problem debt through legislation such as the Bankruptcy and Debt Advice (Scotland) Act, but raising awareness of alternative ways of accessing credit is key.
“By showing people payday lenders are not the only option we can lessen the demand for the service.”
The charities StepChange and Citizens Advice Scotland have been inundated with cases of people struggling with payday debt, which now accounts for 12% of Scotland’s debt.
Every week Citizens Advice Scotland sees 100 new cases of people with unmanageable debts to payday lenders, while one in four (25%) who contact StepChange are suffering from payday loan debt.
Sharon Bell, head of StepChange, who gave a presentation at the Payday Lending Summit, said: “This Scottish government action plan is welcome – anything that better protects consumers from these loans and their potentially damaging repercussions is good news.
“We see too many people falling back on such high cost credit in order to either cope with existing debt problems, or just to make ends meet, often to damaging effect.
“StepChange is calling on policymakers to consider the idea of ‘breathing space’ – a break from interest, charges and enforcement, where debts can be repaid over an agreed period – so debtors in difficulty don’t have to keep borrowing to service borrowing.
“We also need a better short-term credit market, where banks, credit unions and employers play a role in providing more.”
Susan McPhee, head of policy and public affairs at Citizens Advice Scotland, added: “Accessing loans through a payday lender seems easy when so many shops are on our high streets and lenders bombard us with adverts for credit.
“But paying back such loans is not always easy and it is often the poor practices of payday lenders that cause problems to occur for people who can easily get into difficulty making their repayments.”