SHARKS EXPOSED 5th Dec 2008.

RATE CUT EXPOSES RIP-OFF LENDERS

THOMPSON CALLS FOR CAP ON INTEREST RATES

Dave Thompson SNP MSP for the Highlands and Islands and a member of the Scottish Parliament’s Economy Committee is to meet with Cabinet Secretary for Justice Kenny MacAskill MSP and representatives from Citizen’s Advice Scotland and Money Advice Scotland next week to discuss the need for a cap on interest rates in line with countries across Europe.

With interest rates now cut to 2% Mr Thompson has identified irresponsible lending practices, including extortionate interest rates as a potential problem as families face recession and as a real burden on consumers.

Scotland has a distinct problem with consumer debt and high interest rates. For instance, in Glasgow alone 45,000 people are borrowing from doorstep lenders at rates of around 164%. Even ‘mainstream’ lending products such as store cards and credit cards often have sky high interest rates. Previous studies suggest that unsecured debt in Scotland is almost one third higher than the rest of the UK.

According to the charity Debt on Our Doorstep, the UK is the only country in Europe that does not have a limit on the interest rates that lenders can charge – with the result that sky high interest rates are causing misery for many families and individuals.

Mr Thompson commented:

“Extortionate interest rates are crippling individuals, families and communities across Scotland.

“With actual interest rates now down to 2%, the idea of lending rates at 164% is outrageous.

“For too long the UK Government has sat back as interest rates of 164% and sometimes even higher have ruined lives in Scotland. The whole of the UK has a severe problem with high levels of debt – and reports suggest Scotland is particularly badly affected.

“We only have to look to our European neighbours to see that it doesn’t have to be this way. The UK stands alone in Europe as refusing to limit interest rates. Our continental neighbours have interest rate ceilings that stop unscrupulous lenders taking advantage of society’s most vulnerable people – it is time for Scotland to join them.

“I hope this meeting with the Cabinet Secretary will be the first step in a process that leads to a limit on interest rates and an end to the exploitation of many of our fellow citizens.”

Notes to editors:

Interest rate Caps in Europe

Below are some examples of interest rate caps in Europe:

· Austria - 20%
· France 22%
· Germany 21%
· Italy 15%
· Switzerland - 15%

A recent report at a Conference on consumer debt in Scotland hosted by Debt on our Doorstep and Citizens Advice Scotland stated that the UK was the only country in Europe that did not have some form of cap on interest rates.

Examples of high interest lending products:

Doorstep lenders: Provident Personal Credit charges 183%APR.

Store Cards: Store cards regularly charge interest of almost 30%, with 25% being the norm.

Credit cards: Credit card interest is on the rise, despite the base rate being at its lowest level for half a century. Recent research shows the average rate of 17.6% - but for many customers the rate is far higher. A Vanquis Credit Card, for instance, charges 40% interest.

Consumer Debt in Scotland

A report by Debt Free Direct in 2004 found that the average Scot’s unsecured borrowing amounts to £7,848, which is £1,850 (31%) higher than the UK average of £5,993.