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Payday lender backs down over "student loan" page

The Momentum UK Team 12 January 2012

Payday loan company Wonga have removed a page 'targeted' at students from their website after widespread criticism that the page was irresponsible and unethical.

Payday loans are high interest loans offered over a short period, typically 30 days. APR on such loans can amount to as much 4,214%. Left unpaid payday loan charges can quickly spiral out of control.

President of the NUS Pete Mercer described the page, which has now been removed, as "irresponsible", he went on:

"Students should think long and hard before choosing payday loans over any other form of borrowing, including government-backed student loans. If students are struggling to make ends meet there is often other support available, and anyone worried about their finances should talk to their students' union or financial advisers at their university."

Wonga defended the page titled "student loans", offering payday loans to students, but removed the page in the face of mounting criticism. In a statement replacing the student loans page they said:

"We would like to clarify that Wonga does not target students. Yet we do not discriminate against working, adult students who may choose to apply either, because all applications are assessed in the same robust and completely objective way.

Payday loan lending has faced widespread criticism in recent months amid calls for tighter lender regulation.

A report released in December suggested that as many as 3.5million people in the UK could turn to payday loans across the following six months. President of R3, the insolvency trade body, Frances Coulson said at the time:

"Payday loans are not the best way to resolve debt struggles. We know that many who take them out find them to be a negative experience, often escalating financial troubles."

However, John Lamidey of the Consumer Finance Association, who represent the interests of many short term lenders, defended payday loan providers:

"Our own independent research, and that of our members, has shown that on the contrary, 94% of payday customers are satisfied with the service and crucially that more than nine out of ten customers of a CFA members said they had never felt they were being pressured by staff to extend existing loans."

 

Momentum