GANGSTERS muscling in to the payday loan and pawn shop ­industry face losing their dirty profits.

Ministers have added offences under the consumer credit act, usually routine court matters, to the list of those which fall under the Proceeds of Crime Act.

Their move means that those who use payday loans to both profit and launder drugs earnings could lose their homes, cars and bank balances under special ­"lifestyle" provisions of the law.

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A Scottish Government spokeswoman said: "The Proceeds of Crime Act is having a real impact on how Scotland's prosecutors and police tackle criminality at every level by giving them the power to hit criminals where it hurts - their wallets.

"Criminal lifestyle offences help ensure that organised criminals, involved in many different types of crimes, feel the full force of the law."

The move comes just a month after The Herald revealed Scotland's most senior detectives believed that the payday loan sector, already known for its extortionate interest rates, was being infiltrated by hardcore criminals.

Assistant Chief Constable ­Ruaraidh Nicolson, of Police Scotland, said: "There is evidence organised crime is involved in payday loans.

"Nobody is suggesting every payday loan company is part of an organised crime group. But we want to dismantle the ones that are by whatever means we can. It may be just looking to the regulator. It may be by HMRC. Or Police Scotland. We will use the most appropriate tool."

That tool box will now includes proceed of crime or Poca legislation.

Graeme Pearson, Labour's justice spokesman and a former head of the Scottish Crime and Drug Enforcement Agency, said: "This is to be welcomed. There is no doubt organised crime is engaged with payday loans, which is almost legitimised loan sharking. The use of Poca is obviously something that will put them back on their heels. One looks forward to the future when the assets recovered become very significant."

Criminalised payday loan companies can take in substantial profits and the income from such activity could be ploughed back in to the communities that such gangsters prey on, Mr Pearson said. The former police officer believes far more than the current £8 million a year or so could be raised by Poca by targeting such individuals.

"The turnover for organised crime is £2 billion a year and the numbers for Poca receipts are so far are small. Anything that can facilitate more recovery has got to be good."

Mr Pearson added: "Payday loans shackle people to debt. But at least if the people involved in payday loans are doing it legitimately, then their profits are subject to taxation and the public purse wins. Payday loan companies run by criminal enterprises won't be worried if the children if their borrowers eat or the house is heated as long as they get their weekly or monthly payback come what may. In these circumstances we should do everything we can to make sure as many organisations in this business as possible are legitimate."

The Scottish Parliament must now approve the amendment, which is a statutory instrument, by resolution before it can become law. MSPs are expected to do so this week. The amendment will not be retroactive.

The Consumer Finance Association, which represents short-term lenders, has described police claims that its industry is being infiltrated by gangsters as a "worrying development".