Council slammed for giving payday loan firm £700k

The site at Ratho where Cheque Centres Ltd has its HQ. Picture: Ian Rutherford
The site at Ratho where Cheque Centres Ltd has its HQ. Picture: Ian Rutherford
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CITY leaders have effectively subsidised a payday loan company with £700,000 of council taxpayers’ money – despite their public opposition to the controversial lenders who charge massive interest rates to some of the city’s most vulnerable people.

Cheque Centres Ltd – which typically charges customers 3873 per cent APR – is enjoying half rent for its head office and call centre in council-owned premises at Ratho Station.

And the company was also handed more than £160,000 of council cash to help fit out the property.

Today, the local authority was accused of being hypocritical for giving financial assistance to a key player in the payday loan industry.

One MP warned the authority should not be doing deals with businesses which cause misery and financial hardship across the city.

Last year, the council announced it would act to curb the “excesses” of the payday loan companies and adopted a package of measures which included blocking access to payday loan ads and websites from council computers.

It followed a petition by the Debtbusters campaign, backed by Lothian Labour MSP Kezia Dugdale, calling for a crackdown on legal loan sharks.

The move means council staff and people using computers at libraries, community centres and other council buildings cannot log on to payday loan sites, and adverts from the companies do not appear.

At the time, community safety leader Councillor Cammy Day said: “It is very important that payday loan companies are closely monitored to make sure they are not exploiting vulnerable people or leading people into debt.”

But council papers reveal that in November 2012 councillors agreed to rent Cheque Centre Ltd almost 19,000sq ft of council-owned office space at Phase 3 of the Ratho Park office development with a headline rental of £213,491 per year.

The deal included half rent for the first five years of a ten-year lease – worth £533,727 – and a contribution of £166,750 towards fitting out the offices. That’s a total benefit to the company of £700,477.

The finance and budget committee, which approved the deal, was told it was costing the council £100,000 a year to maintain the empty premises. Talat Yaqoob, campaigner for Debtbusters, said: “As someone who has campaigned against payday loan companies, it’s a huge disappointment to know that the council have effectively been supporting – in fact subsidising – their existence.

“It’s contradictory and hypocritical. Payday loan companies are renowned for targeting the most vulnerable in society and encouraging people to fall into dangerous debt cycles.

“The council should be putting this money into promoting and supporting credit unions or alternative, safer financial support, not supporting the companies who readily exploit people.”

Anti-poverty campaigner Willie Black, of North Edinburgh Fights Back, said: “Knowing what the council has said about these companies, I’m surprised they have let this go through.

“It looks as if what appears a strong stance has been compromised by this decision.”The Cheque Centre office at Ratho Park is the company’s European headquarters and employs 180 people. It also serves as a base for parent brand Axcess Europe and related companies Cash Generator and The Loan Store. They are all owned by US firm Axcess Financial. Edinburgh West Liberal Democrat MP Mike Crockart said the council’s position appeared hypocritical.

He said: “I’m appalled to learn that a council that promotes its support for co-operatives should invest £700,000 in the success of a payday loan company. If that money had instead been invested in the city’s credit union, many more vulnerable people could have been protected from the predatory practices of these types of companies.”

He said credit unions were the best example of co-operatives at work and operated on interest charges of 25 per cent APR as opposed to Cheque Centre’s 3873 per cent.

Edinburgh East Labour MP Sheila Gilmore said the lease deal had been agreed before the council had taken an explicit stance on payday loans.

But she said: “Lessons need to be learned here. When the council is taking commercial decisions such as these it cannot make money from businesses which cause misery and financial hardship across the city.”

Campaigners accuse payday loan companies of profiting out of other people’s poverty.

They say that vulnerable people in real financial difficulties are tempted into taking out loans as an easy answer, but they are then hit by extortionate interest rates, which they cannot pay, and end up taking out further loans, leading to an ever-increasing burden of debt.

Charities have warned of a “dramatic increase” in the number of people with debt problems. StepChange said 1052 people from the Capital contacted its helpline last year, an increase of 42 per cent from on 2012.

The council’s own Debt Advice Service has also seen the problem multiply – from just £5560 worth of payday loan debt in 2011-12 to £84,000 in 2012-13.

And there have been reports of people driven to suicide by worry over payday loan debts.

In Bolton, Greater Manchester, last year, a 36-year-old father doused himself in petrol and turned himself into a human fireball after being harassed for money by payday loan firms.

And the parents of an 18-year-old who committee suicide in Essex said he had turned to payday loans to fund a gambling habit.

One payday loan company said loans were being taken out so fast that lenders could not keep pace with demand.

Jeffrey Weiss, chairman of DFC Global, which owns The Money Shop, said bad publicity had not hit their trade. He said: “We have seen no decline in consumer demand. In every geography in which we operate, the consumer demand exceeds the appetite of providers to meet it.”

The UK Government has said it will introduce a cap on the cost of payday loans, but details, including the level at which the cap will be set, have yet to be spelled out.

Meanwhile, the Scottish Government has called a summit on how planning rules could be used to stop the spread of payday loan shops.

A Cheque Centre spokesman said he could not discuss details of the firm’s lease from the council. But he said: “Cheque Centre first started in Edinburgh nearly 18 years ago, and so it made absolute sense to choose here as the site of our European head office.

“We now employ more than 230 people across Edinburgh, over 180 in our office at Ratho and about 50 in our branches across the city.”

Finance convener Councillor Alasdair Rankin defended the council’s deal with Cheque Centre. He said: “The lease of accommodation at Ratho was a commercial arrangement approved by the council.

“Before Cheque Centre Ltd was granted the lease, most of the property had lain empty for more than three years, attracting considerable costs in vacant rates and unrecoverable service charges. Bringing new business to the development, which was subsequently fitted out as an office, resulted in significant annual savings.”

He added: “The council is committed to responsible lending. It is important that people are aware of the wide range of options available to them and we will continue to work with credit unions to offer alternative, more cost-effective ways to get a short-term loan.”


The Church of England was left red-faced when it emerged it had a stake in payday loan company Wonga despite an outspoken attack by the Archbishop of Canterbury, Justin Welby. He had vowed to force payday lenders out of business by helping credit unions compete by allowing them access to church buildings and expertise. But then the church’s £5 billion pension fund was found to have invested in one of Wonga’s backers, Accel Partners.


Single mum Lisa Lieske took out two £50 payday loans, but quickly found her cash problems spiralling and is now terrified about what happens next.

She said: “I took out two loans from the Cheque Centre and then, because I received a bill I didn’t expect, I applied for another loan, thinking it would come off my benefits in three seperate payments – so you can imagine my shock when they took two payments off in one instalment, which is not how it was explained to me at all. I was left with £59 to last two weeks.”

Lisa, 39, from Duke Street, Leith, now owes around £300. She said: “I don’t know what is going to happen next. Something has to seriously change or the Cheque Centre need to stop offering loans to people when it is causing serious debt problems.”

Lisa was horrified at reports of people being driven to suicide because of payday loan debts.

“Then I discovered that one of my friends went through the exact same problem where he was thinking about also ending his life. He had kept it to himself, but I noticed he was getting more and more depressed and eventually he sobbed his heart out.

“He said he wanted to die, but with support he managed to get his debt under control. Something needs to be done to stop these companies taking advantage of vulnerable people.”

A spokesman for Cheque Centre said: “We always ensure that customers are made aware these are short-term loans. If customers do find themselves in a position where they are over-committed, then there are options that we can offer.

“Customers are regularly asked to inform us if they cannot repay their loan. In this case we have not received repayment and the customer has not contacted us to discuss it and the debt has been sold on for others to collect.”


By Ken Houston, Owner of PR firm Ken Houston Media Services and former property editor of The Scotsman

Tenant incentives are not unusual, especially in what is still a depressed office market.

Even so, why would a landlord offer a 50 per cent reduction on rent for the first five years of a ten-year lease and contribute £166,000 towards fit-out costs as it is claimed Edinburgh City Council has done in the case of Cheque Centre? Would it not be simpler just to agree a reduced rental for the whole period?

What militates against this is the fact that the capital value of a commercial property is based on two factors: the quality of the tenant (‘the covenant’) and the rate of the “headline rent”.

A high-quality tenant (for example, a FTSE-100 company) provides a sense of prestige and security – it is considered highly unlikely to default on any lease agreement. Hence a “good covenant” will add value to the investment.

As for income, the landlord will be anxious to promote the “headline rent”, because he considers the “net rent” (that being paid by the tenant after discounts and any capital incentives like fit-out costs) as being temporary. The “headline rent” is what the landlord believes – or affects to believe – is the rent the market will eventually be prepared to pay and quoting this will help boost the capital value of the investment.

However, property companies offer rental incentives with their own money or that of their shareholders; whether a local authority should be doing so with public funds is another matter.