A coroner has called for an overhaul of the payday loan rules after a mentally ill teenager committed suicide the same day lender Wonga emptied his bank account, leaving him penniless.
18-year-old Kane Sparham-Price, who had spent much of his life in care, hanged himself after going penniless when Wonga made a payment due under his debt agreement with the company.
His death prompted South Manchester Coroner John Pollard to write to the Financial Conduct Authority to warn them that he believes there may be similar future deaths unless action is taken.
Mr Pollard called for the introduction of a minimum sum that 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 stressed that it had introduced new measures, including controls on how often lenders can access customer funds, to help minimize the risk of people ending up with empty accounts.
Payday loan companies and brokers have come under fire in recent years for charging high interest rates and one-off fees to clients 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 repeatedly attempted to withdraw money directly from the same bank accounts.
Mr Sparham-Price, of Ashton-under-Lyne, took out an unknown number of loans with Wonga at the age of 18 and left the care of local authorities. Shortly before his death in February 2013, he posted on Facebook his enthusiasm for moving to an apartment and said he was waiting for a deposit to be arranged.
There is no indication that Wonga acted illegally or knew he had left Mr. Sparham-Price penniless.
Mr Pollard, who discovered the teenager had committed suicide, cited a rule that requires coroners to demand that organizations take action when they fear similar future deaths. The case was heard a year ago, but only came to light after it was reported by the Disability News Service.
The coroner worried about the right of loan companies to empty bank accounts. He said: “While I accept that different payday lenders are legally allowed to ’empty’ someone’s bank account if money is owed to them, it seemed to me that there should be a legal minimum amount that must be left in the account (say £ 10 to avoid absolute destitution.
Wonga said: “We were sorry to learn of the tragic death of Mr. Sparham-Price.
“We take our responsibilities to our clients very seriously and have strict lending criteria in place. We did a full review of this case at the time to confirm that we acted in accordance with regulatory guidelines. “
John McArdle, disability rights group Black Triangle, said: “These companies are preying on the poorest in our society. More needs to be done to protect people in this situation through banking procedures and to ensure that their minimum income levels are preserved. “