Scottish church head calls for credit debate

The Rt Rev John Chalmers said the poorest are “most badly served and most easily exploited” by the credit market.

Recent figures suggest restrictions on payday lending as a result of a regulator crackdown on the industry will see borrowing reduced by £750 million per year, with 160,000 fewer people taking out high-cost loans.

The Moderator has now backed a new report from the Carnegie UK Trust highlighting the need for urgent action to help those who would have used the facility but are now left without access to credit.

The report welcomed the recent regulations to restrict the activities of payday lenders but says a major gap remains in the supply of more affordable forms of credit.

Mr Chalmers (pictured) said the demand for credit has not disappeared and questioned where the needy will now go to borrow money.

Writing in the latest edition of Life and Work magazine, the Moderator said: “Credit is now a vehicle built into the fabric of modern life, but in credit markets, as with so many things in life, the poorest are most badly served and most easily exploited. Most of us do not realise how complex and challenging the credit market really is.

“These new regulations are welcome interventions. They have significantly restricted the operations of many high-cost credit suppliers and have dramatically altered the nature of the high-cost credit market.

“However, action to curtail lending in this sector does not, in and of itself, reduce the need for short term, life-saving access to money. Where will those shut out by new regulations now go to borrow money? Their demand and need for credit has not disappeared.”

He adds: “I wish that no one had to access money in this way; I wish that there was a universal definition of affordability and I wish that benefit rates and living wages meant that people did not have to live on the breadline, but they do. The solution, therefore, lies in addressing a vast range of underlying and overarching issues.”

The Carnegie UK Trust report, Meeting The Need For Affordable Credit, said a range of credit alternatives are required within the financial system.

Chief executive Martyn Evans said: “The question of how to make credit available on affordable terms to the poorest members of our society has long been a deeply complex and contested public policy issue.

“However, to find the right solutions we need a much better understanding of who borrows money, how and why. Only then can we come up with alternative services that really meet peoples’ needs. Our report seeks to build some of this understanding but we need an ongoing debate if we are to achieve significant progress.”