Payday lenders are ‘widespread’, says Hartlepool advisor

Joe Michna from CAB in Park Road.
Joe Michna from CAB in Park Road.

CITIZENS’ advice bureau bosses have welcomed the decision to force payday lender Wonga to write off £220m of debts for 330,000 customers.

Joe Michna, bureau manager at Hartlepool Citizens’ Advice Bureau said not checking if people can afford loans is a “widespread problem” in the payday loan industry.

It comes after Wonga confirmed it is writing off £220m of debts for hundreds of thousands of customers after putting in place new affordability checks.

The company - which has faced criticism for its high interest rates and debt collection tactics - made the change after discussions with regulators the Financial Conduct Authority.

It has been confirmed that customers in arrears whose loans would not have been made under the new checks will have their debts written off and a further 45,000 customers in arrears will not have to pay interest on loans.

The move has been welcomed by Mr Michna who said people are struggling to make ends meet as high interest rates and charges quickly ramp up debts.

Mr Michna said: “We very much welcome the action taken by the Financial Conduct Authority in relation to Wonga.

“Not checking if people can afford loans is a widespread problem in the payday loan industry and Wonga have been one of the biggest culprits. A lack of checks by lenders such as Wonga is setting a debt trap for borrowers.

“People are left struggling to make ends meet as high interest rates and charges quickly ramp up debts.

“The FCA is right to come down hard on Wonga after it found it had poor affordability processes.

“We have found that in about 50 per cent of cases of payday loans we have dealt with, lenders did not ask about people’s finances.

“Checking whether someone can actually afford to repay a loan should be at the heart of any credit process.

“In Hartlepool, we have dealt with a number of clients who have taken out loans with Wonga and regretted doing this after discovering how high the interest rate was.

“Clients in Hartlepool and elsewhere should be contacted by Wonga very soon to be advised of what is going to take place next in most instances, this means that the loan will be written off.

“We shall be monitoring the situation very carefully locally and any local resident with any concerns should contact us.” Affected Wonga customers will be notified by October 10.

Wonga’s chairman Andy Haste said a review of lending practices had shown the need for change at Wonga was “real and urgent”. New stricter lending criteria would mean “accepting far fewer applications from new and existing customers”. Call Hartlepool CAB on (01429) 268242.