The possibility of making payday lenders stump up more cash to pay for money advice services should be explored by Governments north and south of the border, a Scottish Parliament committee has recommended.
In a report, the Economy, Energy and Tourism Committee gave its support to the mandatory provision of money advice and financial education proposed in the Bankruptcy and Debt Advice (Scotland) Bill.
However, the report called on the Scottish Government to clarify the impact of this provision on the workload of the “free money advice sector” and the cost of delivering such a service.
Concerns have been raised about the impact on the likes of the Citizens Advice Bureau (CAB) and other organisations through increased workload pressures and a lack of extra funding.
MSPs have floated the idea of making firms which provide credit services pay more to support those who fall into financial hardship after signing up to such deals.
The report states: “The committee recommends that the Scottish Government enters into discussions with the UK Government and the financial/credit industry to gauge whether to increase the levy and contributions paid by the industry to the debt/monetary advice agency to help meet any increased costs from the provision of financial education.”
Committee convener, Mid Scotland and Fife MSP Murdo Fraser, said the issue was particularly pertinent at a time of year when many fall into debt through the likes of credit schemes or payday loans.
He said: “This legislation represents a significant step forward in helping those in severe financial difficultly and who enter the bankruptcy process.
“Importantly, it can prevent people getting into debt in the first place through financial education. However, in this context of public sector austerity, we need to be clear about how much this will cost and who will pick up the tab.
“This is a stark reminder that there needs to be high quality financial education in place to make sure that more people don’t fall into the vicious circle of debt.”
Figures released last month by the charity StepChange showed Scotland “leads the UK” in the number of people in debt to payday lenders, with more than 100 cases reported every week.
Speaking at that time, Citizens Advice Scotland’s policy manager Keith Dryburgh said: “Our message to Scots today is that if you have got into debt you can’t handle, don’t just take out more loans.
“Get advice. The CAB offers free, confidential advice on how to get control of your debt.”
The committee’s report includes a number of recommendations on the use of a common financial tool and the transfer of functions from sheriff courts to the office of the Accountant in Bankruptcy.
It also welcomes consideration by the Scottish Government on the issue of the retention of bank accounts by undischarged bankrupts and whether the bill can be amended to make it easier for such people to hold a bank account.