When pay day loans become the death of us, is it time to tighten the rules?

Kane Sparham-PriceAn inquest into the death of Greater Manchester teenager Kane Sparham-Price, 18, heard that the teenager had “numerous problems including those connected with his mental health” and spent much of his life in foster care and care homes.

The teenager took loans out from pay day loan lenders Wonga after he had turned 18 and left local authority care.

“He wanted to be a doctor. He was the happiest I’d known him.”

Tragically, he was found dead after hanging himself in February 2013 after the loans company emptied his bank for a loan he had signed up to.

Previous to his death Kane had aspirations to train as a doctor and  was trying to arrange a deposit for a new flat.

Despite his money problems, his friend Stefan Williams said Kane was too proud to take cash off anyone.

Stefan said: “I knew he had money problems but I didn’t realise how bad it was. My mum offered to give him a loan but he turned it down.

“We were more like brothers than friends. He was trying to get work but nobody was taking him.

“I spoke to him the day before – he said he was going to sort out his health and go back to college.

“He wanted to be a doctor. He was the happiest I’d known him.”

John Pollard, the senior coroner for South Manchester, said in the report, uncovered by Disability News Service last week: “He was left with no money in his account and no means of borrowing any more. Whilst 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 an account (say £10) to avoid absolute destitution; and as I understand you set and regulate the rules, you might look at this with a view to preventing further deaths.”

Change to current legislation governing loans would be “undesirable”

The report was sent to the Financial Conduct Authority (FCA) 12 months ago. In the FCA’s response last October, the chief executive, Martin Wheatley, said introducing such changes would be “undesirable” because it would include the potential for breaching a customer’s privacy, as well as the possibility of incurring extra bank charges if a payment was refused.

Wheatley added, that the FCA had already taken action to restrict continuous payment authorities (CPAs) as part of new rules on payday loans. This meant that lenders such as Wonga were no longer allowed to make more than two attempts to use a CPA to take a repayment or use a CPA to take a part-payment, as in the case of Sparham-Price.

He said: “We found that some lenders were using CPAs as a debt collection method and that some consumers were left in significant difficulties and unable to pay for essentials such as food and heating.

“This restriction should mitigate the likelihood of lenders ‘clearing out’ a consumer’s account, as payment will only be taken where the amount can be taken in full.”

“With a history of causing serious harm to borrowers, payday lenders still need to be kept under a watchful eye”

Since the new rules came in in April, Citizens Advice says it’s been receiving half as many requests for help with pay-day loans as before.

“Following concerns raised by Citizens Advice the regulator and government made a concerted effort to tackle payday lenders. Similar efforts are required for other high-cost credit companies,” says its chief executive Gillian Guy.

But, she adds: “With a history of causing serious harm to borrowers, payday lenders still need to be kept under a watchful eye.”

In October last year, Wonga agreed with the FCA to make “significant” changes because it was “not taking adequate steps to assess customers’ ability to meet repayments in a suitable manner”. This meant that hundreds of thousands of customers subsequently had their outstanding loan debts written off.

Suicide is considered by almost 50% of people in debt in the UK. With the stress and burden of debt, sometimes suicide seems the only possible way out. It is vital that people are made aware of potential debt solution and are able to seek help and become debt free. Whether it is consolidation or taking a more formal debt solution, there is a route available to become debt free.

In one of my previous blogs, I wrote about educating our young people whilst in school about the importance of budgeting and the day to day cost of living. Kane is yet more proof of our failure to prepare our next generation about the dangers of overstretching and taking unmanageable loans and credit.

Kane’s death is a real tragedy and my sincere condolences and thoughts are with his family, however, if the FCA and mental health charities can get their heads together to find a solution to this ongoing problem, then it need not be vain.

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