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Scotland leads UK in payday lending

14 November, 2013

Scotland has the highest volume of payday lending among StepChange Debt Charity clients in the UK, according to a new report released today.  It shows that by June 2013 over 10 percent of total client debt in Scotland was the result of payday loans, and almost 20 percent of clients had at least one payday loan. 

This is just one of the findings in Scotland in the Red, an analysis of debts held by clients of the charity in Scotland since 2010.  The data shows large increases in priority debt arrears such as rent, mortgage, gas and electricity, particularly in the last six months.  Moreover clients in Scotland had the highest value of Council Tax arrears in 2012 - nearly double the UK average at £1,312.

The report compares client debts in Scotland with the rest of the UK, and also allocates them to one of the Scottish Parliament’s 73 constituencies and eight regions.

Sharon Bell, head of StepChange Debt Charity Scotland said: “This is the first time the charity has looked in detail at the pattern of debt in Scotland and it has revealed some startling results.

“The explosion in problem debt from payday lending, and the steady growth in numbers with priority debt arrears, is a clear indication that more and more Scottish families are finding it difficult to make any disposable income cover basic household costs.

“StepChange Debt Charity is well placed to help, thanks in part to recent short-term funding from the Scottish Government.   This new report will enable us to track the scale of problem debt in Scotland in what for many is an uncertain economic future.”

Key findings:

Payday loans

The most dramatic rise in debts in Scotland has been in payday lending, with 18.2 percent of clients having at least one in June 2013.  This compares to 9 percent of clients in Scotland in 2012, 5.9 percent in 2011 and 2.6 percent in 2010.

Glasgow region had the most clients with a payday loan in 2012 (11.1 percent), while those in Central Scotland had the highest payday loan debt (£1,648).

10.3 percent of total client debt in Scotland was the result of payday lending by June 2013.  It was 9.4 percent in England, 8.4 percent in Wales and 7 percent in Northern Ireland.

The average total payday loan debt in the UK has grown from 0.9 percent of client debt in 2010 to 9.4 percent in June 2013.  Over the same period credit card debt by value fell from 38.6 percent to 30.9 percent.

Percentage of StepChange clients in Scotland with payday loan debt

Council Tax

Clients in Scotland had the highest value of Council Tax arrears in 2012 at £1,312, nearly double the UK average of £783.  Scots were second highest in number for Council Tax arrears in 2012 at 29 percent, above the UK average of 27 percent. 

This trend continued in the first six months of 2013, where over a third of clients had arrears in Council Tax (35.3 percent).  This figure was 22.1 percent in 2011 and 18.7 percent in 2010.

North East Scotland had the most clients with Council Tax arrears in 2012 (37.2 percent), while those in Glasgow Region had the highest average value of arrears (£1,712).

Graph showing StepChange clients in Scotland with council tax arrears

Mortgage

Scotland had the lowest percentage of clients with mortgage arrears in 2012 at 35 percent, together with their lowest average value of £2,328.  This was three percent below UK client averages in 2012 of 38 percent and £2,962 respectively. 

Nevertheless mortgage arrears in Scotland increased in the first six months of this year, to 40 percent of clients and an average value of £2,353.  In 2011 these figures were 38.5 percent and £2,458, and in 2010 were 32.5 percent and £2,442.

Lothian Region had both the highest number of clients with mortgage arrears in 2012 (39.2 percent) and highest average value (£2,977).

Graph showing StepChange clients in Scotland with mortgage arrears

Rent

The average value of rent arrears among clients in Scotland has declined steadily since 2010, reaching £581 in 2012, suggesting that clients are receiving help sooner.  Average arrears were £594 in 2011 and £616 in 2010.

However the spread of arrears has grown, particularly in the last six months.  20.4 percent of clients were in arrears with their rent in 2010, 21 percent in 2011, 25.1 percent in 2012 and 31 percent in June this year.

Glasgow Region had the highest number of clients with rent arrears in 2012 (35.8 percent) while South Scotland had the highest average value (£824.31).

StepChange Scotland clients with rent arrears

Electricity

Clients in Scotland had the highest average electricity arrears in 2012, at £542.  The UK client average in 2012 was £516.  However only 9.7 percent of clients in Scotland had arrears in 2012, compared to 13.4 percent in England and 10.4 percent in Wales.

7.7 percent of Scottish clients had electricity arrears in 2011, with an average of £468, while 8.5 percent had arrears in 2010, with an average of £449.

Glasgow Region had both the highest number of clients with electricity arrears in 2012 (12.5 percent) and the highest average arrears (£690.41).

Gas

11.3 percent of clients in Scotland had gas arrears in 2012, with an average value of £447.  This was below the UK average of 13.2 percent and £464 respectively.

10 percent of Scottish clients had gas arrears in 2011, with an average value of £389, while 9.3 percent had arrears in 2010 with an average value of £391.  By June 2013 these figures were 11.9 percent and £455.

Glasgow Region had both the highest number of clients with gas arrears in 2012 (14.1 percent) and the highest average arrears (£598.48).

Income and debt

Scotland had the lowest average client debt in 2012, and was the only UK nation with a larger average client income than debt, at £14,280 and £14,149 respectively. 

Client incomes have fallen in each part of the UK in the first six months of this year except Scotland, which by June 2013 had an average client net income of £14,532. 

Glasgow Region has had the lowest average client net income for two of the last three years, at just over £1,000 per month since 2010.  Glasgow Region has consistently had the lowest average client debt in Scotland, falling to £11,946 in 2012. The highest average debt in 2012 was found with clients in the South Scotland Region, at £15,537.

Notes to editors:

  • Scotland in the Red can be viewed here: www.stepchange.org/scotlandinthered
  • StepChange Debt Charity Scotland advised 3,451 in the six months to June 2013, 4,559 in 2012, 5,822 in 2011 and 6,721 in 2010.
  • Data in the Scotland in the Red report is based on clients contacting the Charity by telephone only.
  • Data on priority arrears is based on the clients who make payments on that priority expenditure only.
  • StepChange Debt Charity’s ethos is to help the “can’t pays”, not the “won’t pays”, and does not condone debt avoidance. StepChange Debt Charity always aims to help its clients pay back what they owe, in a realistic timescale and manner that is suited to each individual’s situation.
  • StepChange Debt Charity is self-funding. Lenders share with the charity the benefit they receive from its operation, making a donation from the money repaid to them. This allows StepChange Debt Charity to retain its independence and ensure that its advice is always in the best interest of the client.
  • The StepChange Debt Charity free phone helpline 0800 138 1111 is open 8am to 8pm, Monday to Friday and 9am to 3pm Saturday.
  • Online help is available any time from StepChange Debt Charity Debt Remedy at www.stepchange.org
  • Follow us on Twitter: @StepChange and @Moneyaware

Media enquiries:

All media enquiries should be directed to Moray Borthwick:

Moray.Borthwick@stepchange.org

Tel: 0141 270 1441 / 07908 130552

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