A coroner has called for an overhaul of the rules on payday loans after a mentally ill teenager killed himself on the same day that lender Wonga emptied his bank account, leaving him destitute.
Kane Sparham-Price, 18, who had spent much of his life in care, hanged himself after he was left pennyless when Wonga took out a payment due under his debt agreement with the company.
His death prompted the South Manchester Coroner John Pollard to write to the Financial Conduct Authority warning that he believed there may be future similar deaths unless action was taken.
Mr Pollard called for the introduction of a minimum sum which lenders must leave in a client’s accounts by law to “avoid absolute destitution”.
The financial watchdog said such a rule would be “undesirable” but underlined that it had brought in new measures, including controls on how often lenders can access customers’ funds, to help minimise the risk of people being left with empty accounts.
Payday loan companies and brokers have been criticised in recent years for charging high interest rates and one-off fees to customers who are often the poorest in society.
The FCA was forced to intervene last year when it banned seven loan brokers from taking on new business after it emerged they were charging arrangement “fees” of up to £75 and in some cases making repeated attempts to take the money straight from the same bank accounts.
Mr Sparham-Price, from Ashton-under-Lyne, took out an unspecified number of loans with Wonga when he turned 18 and left local authority care. Shortly before his death in February 2013 he had posted on Facebook about his excitement at moving to a flat and said he was waiting for a deposit to be organised.
There is no suggestion Wonga acted unlawfully or knew that it had left Mr Sparham-Price pennyless.
Mr Pollard, who found that the teenager took his own life, invoked a rule which requires coroners to demand action to be taken by organisations when they fear future similar deaths. The case was heard a year ago but has only come to light after it was reported by the Disability News Service.
The coroner was disturbed at the right of loan companies to empty bank accounts. He said: “While I accept that the various payday lenders are legally entitled to ‘clear out’ someone’s bank account if money is owing to them, it struck me that there ought to be a statutory minimum amount which must be left in the account (say £10) to avoid absolute destitution.”
Wonga said: “We were sorry to hear of the tragic death of Mr Sparham-Price.
“We take our responsibilities to our customers very seriously and we have strict lending criteria in place. We conducted a full review of this case at the time to confirm we acted according to regulatory guidelines.”
John McArdle, of disability rights group Black Triangle, said: “These companies are preying on the very poorest in our society. More needs to be done to protect people in this position through banking procedures and ensuring their minimum incomes levels are preserved.”
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