Stories of refugees begging on the streets led to a temporary suspension of Glasgow's policy to help with housing asylum seekers.
It has also criticised the unfavourable publicity given to asylum seekers over the last few weeks.
But the Glasgow Welcomes Refugee Committee, which is made up of trade unions, politicians and Refugee Council members, reserved its harshest words for the newly introduced voucher system.
Campaigners believe it will lead to a black market and discriminate against people fleeing violence and persecution.
"It stigmatises people who are already isolated. The organisation which is running the scheme has sent out material to retailers asking them to get involved and the wording that is used is just nauseating.
"These people are being told 'don't miss this revenue-making opportunity. Vouchers will be the only way of buying essential living products - no change given, but you will receive the full value of the voucher'.
"We are talking about people who have fled some from rape, murder, death and destruction and they are being used as an opportunity to make money."
Bad publicity
The committee strongly objects to a voucher system providing financial help which is worth just 70% of income support levels.
It believes money is being unnecessarily wasted and discriminates against those who need it most.
The asylum seekers' cause has received a great deal of bad publicity from the UK press over recent months.
Stories of refugees begging on the streets led to a temporary suspension of Glasgow's policy to help with housing asylum seekers.
The launch on Monday comes as Conservatives and Labour are forced to defend themselves after the Liberal Democrats reported the parties to the race relations watchdog over their handling of the asylum seekers debate.
Lib Dem home affairs spokesman Simon Hughes has referred both parties to the Commission for Racial Equality, saying that they had broken an agreement not to politicise the issue.
Mr Hughes' move comes after the United Nations High Commissioner for Refugees (UNHCR) criticised the Tories' local elections manifesto for claiming that racketeers are "flooding our country with bogus asylum-seekers".
Reacting to the row, the prime minister's official spokesman, Alastair Campbell, said that all public figures had to mind their language on race issues.