MORE than 100 Scots a week are lodging complaints about payday loan companies.
The figure was revealed as the £2 billion-a-year industry, which has boomed during the economic downturn, faces the threat of a TV advertising clampdown by its new regulator.
Citizens Advice Scotland (CAS) said more than 1200 people north of the Border had contacted it over the past three months, with the vast majority struggling to pay back the emergency cash they had borrowed. Many cited sky-high interest rates as one of the reasons for failing to pay back the money.
CAS chief executive Margaret Lynch said she believed the true figure was far higher, adding: "People tend to only come to us when their situation gets really desperate. The fact that over 1200 Scots have done so in just three months is a very worrying sign of just how widespread and how serious this problem has become."
The most common complaint is people having difficulty paying the loans back. Other complaints include money being taken from bank accounts without permission and a failure to explain the small print in loan agreements.
The number of payday lenders across the UK has mushroomed in recent years, in part because of the economic downturn. The companies have been criticised for charging extremely high interest rates.
Yesterday ministers and regulators put the industry on notice at an emergency summit.
The Consumer Affairs Minister, LibDem Jo Swinson, warned firms at the meeting that they were not sticking to "the spirit or the letter" of their own Code of Conduct.
Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), said an advertising crackdown was an option when it begins regulating the industry from next April.
There are no restrictions on payday loan firms advertising their products on TV. He said: "If payday loan companies are genuinely targeting a particular income bracket – people with jobs – why do they advertise on daytime television?"
However, the regulator later clarified that Mr Wheatley had been talking about its powers to pull specific adverts, not a blanket ban.
UK Treasury Minister Sajid Javid said the involvement of the FCA would mark a step change in the regulation of the industry.
"They now have to deal with a regulator with some real teeth. They are going to feel the hand of the regulator on their shoulder and they better get used to it," he said.
"If there is any evidence of irresponsible lending, bad practices, rogue lenders, the regulator has a very important power independently to intervene in that market and to change the rules."
Last week the Office of Fair Trading announced it was referring the industry to the Competition Commission, warning that consumers who could not afford to pay back their loans on time were finding themselves trapped in a spiral of debt.
Meanwhile, Ms Lynch said that payday loans had become one of the most common reasons people approached her organisation.
She added that anecdotal evidence at its offices and through an online survey revealed many lenders are still not offering consumers the fair deal they promised.
She said that if the industry did not stamp out irresponsible lending "then the answer will have to be tougher regulation".
Independent MSP Margo MacDonald, who has been urging Westminster to take a tougher stance, said high interest payday loans should be banned.
She scrapped a bill in 2011 to introduce a cap on interest payments for payday loans after receiving advice that the issue was a reserved matter at Westminster.
The Lothian MSP thinks more should be done to promote the use of credit unions for loans as an alternative to payday lenders.
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