TWO Lothian constituencies are among Scotland’s top ten hotspots for payday loan debt.
Figures collected by debt charity StepChange show people living in Edinburgh Eastern and East Lothian owe some of the largest amounts to payday loan companies.
The shocking statistics were set out in a new report, Scotland in the Red, which revealed just how much people across the country were in debt not only for payday loans, but also arrears in gas and electricity bills, rent, mortgages and council tax.
StepChange said Scotland had the highest volume of payday lending in the UK. Almost one in five clients across Scotland had at least one payday loan – a tenfold increase since 2010.
And in terms of how much people owed, Edinburgh Eastern emerged as seventh in the league table with an average debt of £1937.57 and East Lothian was ninth with an average of £1864.40, compared with the Scottish average payday debt of £1398.07.
Sharon Bell, head of StepChange Scotland, said: “The explosion in problem debt is a clear indication that more and more Scottish families are finding it difficult to make any disposable income cover basic household costs.”
Lothian Labour MSP Kezia Dugdale called on the Scottish Government to introduce “wealth warnings” on payday loans.
She said: “The credit crunch has made working people with decent salaries and big aspirations turn to payday loans instead of overdrafts and credit cards and they are seeing their debts spiral at a rapid rate they would not dream of if it was a loan from a bank. If the government can spend millions on health warnings – telling people don’t drink, don’t smoke, don’t eat fatty foods – then they can spend money on wealth warnings.
“They should show leadership by warning people against the dangers of payday loans, promoting alternatives and guiding people towards debt advice services.”
The StepChange report said average council tax arrears in Scotland at £1312 were nearly double the UK average of £783.
People in Lothian had the second highest council tax arrears after Glasgow – an average debt of £1674.25.
But in Edinburgh Pentlands, average council tax arrears reached £3447.25. And Lothian was worst for mortgage arrears with average debts of £2977.55.
In Edinburgh Central, the average was £5300.20. Ms Dugdale said the debt picture was “extremely worrying”. She said: “People are letting debts build up because that’s the only way they can get through the pay freezes and the rising costs of fuel and food. It’s a ticking time bomb. Debt is threatening to be one of the biggest problems of the 21st century.”
£200 loan bacame £5000 debt
MEN under 35 who are in work have been identified as the most likely payday loan victims.
Two years ago James borrowed £200 from a payday loan company to buy extra Christmas presents for his family.
When he struggled to make the repayments on the loan he rolled it up into a bigger one. When the payments on that loan got too much, he took out another. Before he knew it, he owed £5000 to five different companies. Every single penny of his pay cheque was going to servicing his debt. He sought help and now has a Debt Arrangement Scheme to get the situation sorted.