S2M-5669 Illegal Moneylenders

Scottish Parliament

Thursday 1 March 2007

[THE PRESIDING OFFICER opened the meeting at 09:15]

Illegal Moneylenders

The Presiding Officer (Mr George Reid): Good morning. The first item of business is a debate on motion S2M-5669, in the name of Des McNulty, on dealing with illegal moneylenders.

09:15

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10:49

Stewart Stevenson (Banff and Buchan) (SNP): I draw members' attention to entries in the voluntary part of my register of interests. I suspect that I am the only member who came to the Parliament in an effort to reduce the public opprobrium that my previous profession attracted—for 30 years, I was employed in a bank, albeit in a computing capacity rather than as a banker.

I will address one issue that has not, I am slightly surprised to note, been developed to any great extent, although Colin Fox referred to it tangentially. No one has picked up on the DTI research that says:

"The profile of those using illegal lenders is similar to that of home credit users in that most"—

I emphasise "most"—

"users are female, with families, and are aged 30-40."

In other words, there is an equality issue at the heart of the matter besides all the other issues and we should tak tent of that in our consideration of it. Throughout Scotland, it is largely women who keep families together, so if women are differentially subjected to the evil trade of illegal moneylending, it undermines family life.

Jeremy Purvis (Tweeddale, Ettrick and Lauderdale) (LD): I do not necessarily disagree with the evidence that Stewart Stevenson has presented, but does he also appreciate that, when microcredit—which has been highly successful—has gone directly to women or when the women are in control of budgeting, the management of family finances is much better than in families in which much of the income is managed by the men?

Stewart Stevenson: That is spot on. However, there is a vicious circle: poverty creates debt which creates poverty. All members should recognise and support the efforts that have been made to break that cycle, but we must also acknowledge that we have created a debt-driven society and have normalised debt as a part of life. In less sophisticated economies, the attitude among the poor is different. The people with the best credit rating in the world live in the squatter camps of South Africa. Traditionally, they are not exposed to debt and desperately try to ensure that they always repay their debts. To some extent, the problem has been driven by wealthy people who have used debt over the years, and has spread to people in other parts of society.

I am not Adrian Mole—like Jamie Stone, I am an adult. The people who use illegal moneylenders represent 0.44 per cent of the adult population, but 3 per cent of low-income households and 6 per cent of households in the most deprived areas. That compares to the figure of 2.3 million users of high-cost licensed home-credit lenders in the UK, which is 6.15 per cent of the adult population. The DTI also says:

"On the most deprived estates, 50% of residents have used home credit lenders within the last 5 years."

It estimates that the total that is owed to illegal moneylenders is £40 million or, with repayments, £120 million, so the numbers are big and worrying. I hope that people tak tent of that fact.

Patricia Hewitt said:

"Illegal money lenders, who are unlicensed ..., are commonly referred to as loan sharks. These loan sharks not only take advantage of vulnerable lenders but also bring disrepute to legitimate lenders".

To be blunt, the legitimate lenders will have to live with that, because they are not at the core of the argument.

I am disappointed that, despite our efforts, we have so far made only comparatively modest inroads into tackling illegal moneylending. I note that the DTI's report on the pilot enforcement schemes says that

"9 cases ... have been dealt with by way of formal cautions"

because they were very much at the low end of the offence and only two cases have been brought to court, with a further six in the pipeline. I am not sure why that leads Cathy Jamieson to say that we should have super-antisocial behaviour orders for illegal moneylending. If it is a crime, we should prosecute it as such. I do not understand where the obsession with ASBOs comes from.

I will turn to an important point. In the DTI's research, there is a little table that shows the connection that users of illegal lenders have with formal banking in one shape or another. It shows that about 50 per cent of all residents in the UK have a bank account, but that only about 10 per cent of users of illegal lenders have one. The really interesting thing is that more than 80 per cent of the people who use illegal lenders have a Post Office card account. It is their connection with the formal financial system but that is precisely the card that it is proposed should be abolished. Those people ain't gonna go to the banks—it is not part of their tradition, and they are uncomfortable with banks. If the Executive ministers could do one constructive thing, it might be to persuade their colleagues at Westminster not to proceed with the winding-up of the Post Office card account. That will simply not help.

Colin Fox referred to the problems of the people who use illegal lenders. The DTI has shown that three in 10 are users of drugs or alcohol or have mental health problems. At the core of the matter—I hope that the pilot schemes have tackled this—is reluctance to report the problem. The DTI report shows that 85 per cent of people would never report illegal lending.

I make the simple point that the lending of money is behind big advertising bucks. In every paper, we see adverts for the lending of money. They focus on interest rates but, for most people, interest rates do not actually mean very much. The banks should be forced to start telling people not what the interest rate is, but what they will have to repay. People can understand that, and it would help them to understand the differences between using formal licensed lending and going to illegal sources of money.

The bottom line is that we expect the most from the people who have the least. The financial management skills of members, cushioned as we are from the need to manage our wallets precisely down to the last penny, would be wholly inadequate for the challenge that many people in our disadvantaged communities face. I very much support the amendment in my colleague's name, and I very much support this debate.

10:57