Scots using too many pay day loans

The number of Scots turning to expensive payday loans in a desperate attempt to ease their cash-flow problems more than doubled last year, alarming new figures show.

Scots are also increasingly likely to take out more than two payday loans and are getting into deeper debts with the firms, according to research for The Scotsman by the Consumer Credit Counselling Service (CCCS).

Thousands of Scots have resorted to payday loans in recent years after being denied credit by mainstream lenders and demand continues to grow as unemployment creeps up and pressure intensifies on household incomes.

Payday loans are designed for short-term repayment, but those unable to clear their debt on time face annual interest charges of up to 3,600 per cent, sending them spiralling deeper into debt.

Almost 9 per cent of Scots going to the CCCS for help with their debts last year had a payday loan, up from just 3.6 per cent a year earlier, it reveals today.

The number of loans taken out by CCCS clients averages out at 2.37, while the typical amount owed has jumped from £919 two years ago to £1,199.

One in three Scots admits to anxiety over their debt levels, recent R3 research found, with twice as many people north of the border as elsewhere in the UK worried about their payday loans.

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Recently it has been drawn to our attention that a growing number of hotels and restaurants have been struggling to manage their liabilities in a controlled way. We have been receiving more and more calls from directors from hotel and restaurant companies asking about insolvency solutions to help them trade on.

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Three connected companies that operated a charity collection scam were last week closed down in the public interest by the High Court in London, following an investigation by Company Investigations of the Insolvency Service.

The companies are Air Ambulance Support Community Interest Company (“Air Ambulance Support CIC”), St Anthony (Trading Co) Ltd (formerly Air Ambulance Service (Trading Co) Ltd) and St Anthony Repatriation Ltd (formerly Air Ambulance Service)). Both St Anthony companies had a common director, Anthony Joseph Durkin. Mr Tomas Mickauskas, a former director of Air Ambulance, worked as a leaflet distributor for the two St Anthony companies.

The investigation found the three companies, primarily targeted residents in the South and Midlands, via ‘Charity bag’ drop offs and collections and made misleading representations that the proceeds raised from the onward sale of unwanted clothing would be donated to local air ambulance charities. The reality was this did not happen.

Commenting on the case, Investigation Supervisor, David Hill, said;

“In winding-up these companies, the court is sending a clear message that schemes which set out to deliberately mislead the public in this manner are not acceptable and will be closed when we become aware of them”.

The investigation also found the companies operated in a similar manner, attempting to pass themselves off as authorised collection agents by making charity bag drops in residential areas, with attached leaflets bearing similarities to the logos of official air ambulance charities, in particular that of Midlands Air Ambulance. At no time throughout their trading histories were they ever authorised by any air ambulance service to act as charity fund raisers.

Due to the failure of all three companies to maintain adequate accounting records, it is not known what became of any proceeds generated through the sale of clothing items collected by the companies. No evidence of donations made to any Air Ambulance Charity was found.

The activities of the companies were also found to be not only misleading but in breach of regulations contained in the House to House Collections Act 1939 concerning door to door leaflet dropping where charitable purposes are included. Essentially the Act requires companies conducting collections for charitable purposes to obtain a licence. None of the companies had done so. Several local authorities had received complaints concerning the activities of the companies including Oxfordshire County Council, Poole Borough Council, Wolverhampton City Council and Leicestershire County Council. Public concern was also expressed in widespread attention given in local publications, including articles in the Worcester News, Gloucestershire News and Burton Mail.

Information provided by the Insolvency Service.