MINISTERS have been accused of failing to protect people from falling into debt after the Scottish Government abandoned a pledge to tackle the growth of payday loan companies and betting shops.
Derek Mackay, the former local government minister, said last year the government would change planning legislation to prevent the proliferation of high interest-charging lenders and bookies on the high street.
But the government has quietly announced a U-turn after a public consultation revealed "mixed views" on the the proposals.
Alex Neil, the Social Justice Secretary who dropped the move, said the consultation raised practical difficulties and insisted the government would seek new powers to regulate payday lenders and betting shops, as recommended by the Smith Commission on further devolution.
However he was accused of failing to use Holyrood's existing powers to protect the public.
Scottish Labour deputy leader Kezia Dugdale, who has campaigned against payday "loan sharks" accused him of showing "a complete lack of political leadership".
Concern has been growing over high cost, short term lending and, in betting shops, the growth of fixed odds gambling terminals.
In Glasgow alone it is estimated 100,000 people regularly take payday loans in a market with £57million per year. Punters in the city spend £200m on fixed odds betting machines, which have been described as the "crack cocaine of gambling".
Ministers pledged last August to tighten planning laws to prevent the "clustering" of payday lenders and bookmakers, which have been increasing their presence on the high street, particularly in deprived areas.
It followed a payday lending summit which was convened in response to a campaign known as Debtbusters demanding action to protect people from lenders charging sky-high interest.
In a new report, officials said there was a "clear view" that changing planning laws "did not represent an effective and proportionate approach" to limiting the number of pay day loan shops because of difficulties distinguishing companies from other financial service providers, though it was seen as the most suitable way to restrict betting shops.
Industry representatives argued that extending planning controls would prevent new companies entering the market and reduce competition.
Ms Dugdale, who played a leading role in the Debtbusters campaign, said: "This is a real disappointment and shows a complete lack of political leadership from the SNP Government.
"Pay day loan companies are legal loan sharks preying on folk struggling to make ends meet.
"The SNP had a chance to do something about that and have clearly failed. All we've got is warm words and no action."
Glasgow City Council treasurer, Councillor Paul Rooney said planning changes would not have eliminated the problem but added: "Ministers had to be dragged kicking and screaming to the table to talk about payday lending and problem gambling, by local government, by charities and voluntary groups and by the health services.
"Now, they have abandoned the only meaningful proposal they were ever prepared to take on board."
Mr Neil said: "Since we consulted, the Smith Commission recommended that the Scottish Parliament have powers to prevent the proliferation of payday lending and fixed odds betting terminals and we are pursuing those aims.
"In light of these views and developments, the Scottish Government does not intend to make any changes to planning legislation in respect of betting offices and pay day lending at this time."
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