BY LORI-ANN DOIG (MP)

 

Nearly 160,000 Scots of all ages have taken out payday loans in order to repay existing debts, according to research by the Debt Advisory Centre Scotland.

 

MPs are coming face-to-face with some of the biggest lenders in the industry today to encourage them to limit the number of extensions that can be made to existing loans.

 

Payday lenders, Wonga and Mr Lender, are presenting their defence case to MPs, claiming that these rollover loans are suitable in some cases.

 

Speaking at a House of Commons Business, Innovation and Skills Committee hearing, Wonga’s head of Regulatory and Public Affairs, Henry Raine, defended his company and said that most people pay their loans back on time.

"The vast majority of customers pay us back early or on time and that compares favourably to credit cards or banks,” said Mr Raine.

 

However, payday lenders are being accused of charging extortionate interest rates which is leaving more and more people struggling to pay back their debts.

 

One of the largest lenders in the industry, Wonga, is currently charging a fixed interest rate of 365% as well as a transmission fee of £5.50. This means that if a consumer took out one pound for one day, they would need to repay £6.57.

 

Tony Hutson from Citizens Advice Scotland said, “Many payday lenders operate in ways that ensure people will get into debt they can’t handle. The industry has promised to clean up its act, but our evidence is that lenders are still operating in ways that are bound to hurt vulnerable people.

 

“Our message to the public today is that if you are in debt, avoid rollover loans. Come and see the CAB, for free, confidential advice on how to cope.”