'Step-change' call for Scotland's credit industry
A "step-change" is needed in Scotland's credit industry if financial exclusion is to be tackled, according to a new report.
The Carnegie UK Trust's Affordable Credit Working Group said access to credit in Scotland was "not a level playing field".
It found credit was most expensive for those who could least afford it.
The working group published the report after spending a year analysing financial inequality in the country.
Its recommendations include enabling people to pay off credit union loans direct from payroll, and giving access to basic bank accounts for the poorest borrowers.
The group also suggests the Scottish government assign ministerial responsibility for financial inclusion.
Jeremy Peat, co-chairman of the group and a former chief economist of RBS, said: "While the regulation of payday loans has reduced the supply of expensive credit, it has done little to affect demand for short term borrowing amongst the poorest members of society or to stimulate alternative sources of supply of credit.
"A step-change is needed because that demand is not going away."
The group called for high street banks to allow borrowers to access basic bank accounts via local credit unions or community development financial institutions.
It also recommended that employers in Scotland partner with credit unions to make repaying credit union loans via payroll a standard workplace benefit.
Mr Peat said: "Basic bank accounts offer people access to a mainstream financial product and build their level of financial inclusion.
"With nine mainstream banks now offering free basic bank accounts, we would like to see them all accept applications from local community finance organisations who have assessed the appropriateness of the applicant and verified their identification."
He added: "Enabling Scotland's poorest people to repay credit union loans via payroll will provide the structure and support required to help them access more affordable loan products and improve their financial position.
"It would also grow the membership base of credit unions, helping them to expand their loan book and become more competitive as credit providers to disadvantaged groups."
Scotland's Social Justice Secretary Alex Neil said: "The Scottish government welcomes the publication of the Carnegie report on affordable credit as we recognise financial inclusion and accessibility plays an important role in our efforts to reduce inequalities and create a fairer, more prosperous society.
"We want to ensure that people are able to borrow affordably and treated fairly, that they can access good financial and debt advice, that they have access to basic bank accounts, where appropriate, and are assisted with financial management.
"We are strongly supportive of community finance providers, and are already providing leadership in this area, including work to promote the credit union sector and grow their capacity in Scotland."