Glasgow, Scotland -- (SBWIRE) -- 04/30/2014 -- A study by Glasgow Council last year revealed that payday lenders were responsible for £57m of lending to around 100,000 Glaswegians, many of whom were already drowning in debt and being forced to seek debt advice and take up Scottish debt solutions such as Trust Deeds and Debt Arrangement Schemes. To help combat this, every child in Glasgow will have £10 deposited into a credit union account in their first year of secondary school, a sum that will be protected for at least a year, to help them on the pathway to learning good financial habits. The first year of the savings scheme will give away £60,000 split between an expected first year intake of 6,000 children, and this will be repeated for every subsequent year’s intake.
The aim is to educate youngsters about money from an early age and encourage a culture of savings before lenders begin to target them with advertising encouraging them to take on credit cards and pay day loans and the dangers of getting into debt. Credit Unions were chosen as the financial providers to hold the accounts due to their alternative nature based on members pooling their savings and borrowing from one another. This will give them access to safer, cheaper and longer-term lending when they need it as adults.
The proposed scheme has been welcomed by charities and debt advice companies, particularly in light of Government statistics that show child poverty has been static for the last year. Between 2010 and 2011 the overall level of child poverty dropped from 170,000 to 150,000 and despite efforts to reduce it has stayed there ever since.
In addition to the new scheme for teenagers, the council will be cracking down on payday loans lenders and making it more difficult for them to trade in Glasgow. Unconventional lenders will be stopped from renting council properties, while the council will press the UK and Scottish Governments to allow them to use planning laws to stop lenders setting up in numbers on high streets and shopping arcades.
Councilor Paul Rooney, who is the city treasurer chosen to lead a cross-party group investigating the high interest, short term loans industry, said: "I think we all suspected that the use of these loans would be relatively high in Glasgow, but the figures are startling. "Glaswegians borrowed more than £57m this way in the last year – and around 100,000 adults are using some sort of non-standard credit. To put that in context, it is enough people to fill Celtic Park and Ibrox [football stadiums] at the same time. If you do not have a payday loan, someone you know does."
The decline of the British high street has accelerated since the start of the recession in 2008/9, and many high streets have become retail ghost towns with multiple money lenders and secondhand shops springing up to take advantage of the empty commercial properties.
The increase in the use of high interest short-term lenders such as payday loans companies and loan sharks, has become more prevalent as cash-strapped citizens struggle to make ends meet. Despite assurances from lenders that adequate financial checks are undertaken before loaning the money, Glasgow council found numerous example of people being inappropriately given instant cash. One woman was able to extract 1,500 from seven different lenders over the space of a few days, while a known gambler was given three loans in one day from one lender without any questions as to where the rest of the money, loaned just hours, before already had gone.
A spokesperson for Debt Advice Company Simple Financial Solutions said: “This new scheme of Glasgow council will help thousands of the city’s teenagers develop good financial habits that will stand them in good stead for their future. At the same time, the blight of high interest short-term loans lenders on the High Street will be checked.
Uncontrolled lending to indebted individuals can lead to an increase in bankruptcies – both sequestrations and insolvency plans such as Scottish Trust Deeds – as well as years and years of hardship.”
About Simple Financial Solutions
Simple Financial Solutions are an ethical provider of Consumer debt solutions such as Scottish Trust Deeds, IVA's, Debt Management and Debt Relief Orders. Call them now on 0800 043 2027 for confidential and impartial advice.