THE Moderator of the General Assembly of the Church of Scotland has said payday lenders should deposit a levy for a low-cost loan fund as part of the push against high-cost credit .

Rt Rev John Chalmers said he is backing a new report from the Carnegie UK Trust which has highlighted the need for urgent action on the issue.

The report welcomes recently introduced regulations to restrict the activities of payday lenders, but highlights that a major gap still remains in the supply of more affordable forms of credit.

Many people are still reliant on high cost loans and an increasing number of people are unable to access any type of credit at all.

Figures suggest restrictions on payday lending will see borrowing reduced by £750 million per year, with 160,000 fewer people taking out high cost loans.

Writing in the April edition of the Kirk's Life and Work magazine, the Moderator said: "I wish that no-one had to access money in this way; I wish that there was a universal definition of affordability and I wish that benefit rates and living wages meant that people did not have to live on the breadline, but they do.

"The solution, therefore, lies in addressing a vast range of underlying and overarching issues."

He said: "Recently a progressive think-tank the Institute for Public Policy Research has called for the establishment of an Affordable Credit Trust funded with a levy from lenders themselves and the Centre for Social Justice published a report in which it has called on the UK Government to support social finance providers by investing in a new Social Finance Investment Platform pump-primed by government - these are among the

proposals that now have to explored with some urgency."

The discussion paper from the Carnegie UK Trust titled "Meeting the Need for Affordable Credit" is out on March 23.

It explores how best to meet the ongoing need for credit amongst those unable or unwilling to access mainstream products and concludes a range of affordable credit alternatives are required within the financial system.

The Carnegie UK Trust has created a working group to advance this agenda over the next few months, and is urging a wider public debate on this issue.

Martyn Evans, Chief Executive of the Trust, said: "The question of how to make credit available on affordable terms to the poorest members of our society has long been a deeply complex and contested public policy issue.

"However, to find the right solutions we need a much better understanding of who borrows money, how and why.

"Only then can we come up with alternative services that really meet peoples' needs.

"Our report seeks to build some of this understanding but we need an ongoing debate if we are to achieve significant progress."

The move is being backed by Sharon Macpherson, chief executive officer of Scotcash, which is a community development finance initiative in Glasgow.

She said: "Access to affordable credit remains a key issue for many low income individuals, many of whom are often paying more than better off households in interest and charges.

"The work of the Carnegie UK Trust is crucial in helping us raise awareness of this issue and identify alternative solutions that address the needs of those excluded from mainstream financial services."

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