Interest payments to companies providing high interest loans cost people in Glasgow £20million every year, according to a taskforce set up to tackle the industry.

The Carnegie UK Trust’s Affordable Credit Working Group has spent a year analysing financial inequality and issued a series of demands at an event in the city yesterday.

The group has called for increased investment in community finance, an option for workers to pay off debt through payroll and access to basic bank accounts for the poorest in society.

A list of eighteen recommendations were revealed at community development finance institution ScotCash, based in the Merchant City.

Marie Chadwick, 47, from Shettleston, was struggling to maintain interest payments after taking out high cost loans before she turned to Scotcash.

She said: “Scotcash has been a lifeline for me, enabling me to afford simple things like presents for my son’s birthday and replacing my broken tumble dryer. I was using much more expensive lenders and I just don’t know how I would have made ends meet if that cycle had continued.

“Scotcash even helped me to access grants to cover my energy bills and my mother’s funeral costs, so the support has been invaluable. If there were more community finance options for Scots, I’m sure fewer people would turn to high cost or even illegal lenders to get credit.”

Sharon MacPherson, who runs Scotcash, said the current credit system “penalises those least able to afford to service debt”.

She added: “We estimate the annual extra cost to customers of high cost credit in Glasgow, in the form of interest payments, is £20m.

“If even a quarter of high cost credit customers switched to use credit unions or Scotcash instead, the city would be saving £4.5m annually. We are hugely supportive of these recommendations.”

Jeremy Peat, co-Chair of the Affordable Credit Working Group, former Chief Economist of RBS and a Visiting Professor at the University of Strathclyde’s International Public Policy Institute, unveiled the report.

He said: “Access to credit in Scotland is not a level playing field. Credit is – for a mixture of good and bad reasons – most expensive for those who can least afford it.

“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.”

A national Action Group on affordable credit has been created to drive the process of change. That group already includes Scottish Government representation.

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.”

Very Reverend John Chalmers, Principal Clerk to the General Assembly of the Church of Scotland, will chair the new Action Group.

He added: “There has never been a coherent, nationwide approach to resolving the issue of affordable credit in Scotland. Together we can avoid duplication of efforts, improve sharing of best practice and create new opportunities to tackle the big issues at scale.

“The inequality in our financial system has to change if Scotland is to overcome its wider social problems. Improving access to cheaper, small and short term loans to those who can afford to repay them could improve people’s quality of life – particularly those in disadvantaged communities.”