Ministear airson Cumhachd, lomairt agus Turasachd Minister for Energy, Enterprise and Tourism

Fearghas Ewing SPA Fergus Ewing MSP

FIT: 0131 3485700

E: min istereet@scotland.gsLgov.uk

The Scottish Government

Riaghaltas na h-Alba

Ms Kezia Dugdale MSP The Scottish Parliament EDINBURGH EH991SP

LEGACY 2014
XX COMMONWEALTH SCOTLAND GAMES

Ur faidhleNour ref: GL - 26 - 02 - 13 Ar faidhle/Our ref: 2013/0006895

Cf

April 2013

Dear Kezia Thank you for your letter to John Swinney MSP, Cabinet Secretary for Finance, Employment and Sustainable Growth, regarding the regulation of the high-interest short-term credit market in an independent Scotland. Mr Swinney has asked me to reply, as I have portfolio responsibility for debt and insolvency in Scotland. As I mentioned in the Parliament, I have heard from my own constituents and people across Scotland that the payday lending industry is causing a great deal of misery for indebted individuals. As a Scottish Minister it is incredibly frustrating to look on while Scottish households suffer as a result of these lending practices, nevertheless I have been doing everything I can to bring about changes insofar as devolved legislation allows. As you are aware, , recently announced changes to the Debt Arrangement Scheme in Scotland to freeze the interest and charges at an earlier date for those entering the Scheme. While I welcome the actions proposed earlier this month by the UK Government, I believe that more needs to be done now. In particular, I believe that capping interest rates would provide consumers with real protection. Finland, for example, has recently progressed legislation to introduce a cap on interest rates to improve protection for consumers. I firmly believe that steps must be taken to provide similar protections within the current UK system. The Scottish Government would already be acting in the interests of the people it serves by capping interest charges if we had the same powers about to be handed to the FCA in April next year. For that reason, I have recently written to Jo Swinson MP, Minister for Employment Relations and Consumer Affairs requesting a public consultation in advance of taking action on capping the level of interest charged on short term loans. I also believe that all creditors should lend responsibly and I have concerns that the lack of proper credit
Taigh Naomh Anndrais, Rathad Regent, Dun Eideann EH1 3DG St Andrew's House, Regent Road, Edinburgh EH1 3DG www.scotland.gov.uk

checking by some lenders is causing financial hardship. The Scottish Government would like to see payday lenders introduce real-time credit data sharing, to assess the individual's ability to pay back the loan. This will reduce the rate of multiple and repeat borrowing, which often results in individuals and families finding themselves in severe financial difficulties. I appreciate that the report by the Fiscal Commission Working Group recommends that financial regulation should remain broadly consistent with the rest of the UK, but it also. states that having full control of the e~nomic policy levers means that the Scottish . Government would be fully responsible, and accountable, for tackling the key challenges that Scotland will face in the years ahead. I do hope that the UK Government reacts to my calls for an interest rate cap, and for the industry to introduce better affordability checks. While it may be important to have a general level of consistency with the rest of the UK, in an independent Scotland the needs and rights of the people of Scotland will be this Government's priority. Perhaps you could let me know if your UK counterparts propose to introduce legislation to cap interest rates. Consensus on this matter within political parties would be potentially advantageous. I hope this information is helpful.

FERGUS EWING

Taigh Naomh Anndrais, Rathad Regent, Dun Eideann EHl 3DG St Andrew's House, Regent Road, Edinburgh EHl 3DG www.scotland.gov.uk