Wonga was bad, says Michael Sheen. But even worse lenders could now move | Loans and debts

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Actor Michael Sheen has called on the government to ensure that Wonga is sold to an ethical lender and warns that clients of the collapsed payday business risk being scammed.

Sheen, who began publicly campaigning against high-cost lenders in March, said Wonga’s entry into administration presents an opportunity to push through “fair and responsible” competitors such as credit unions and newcomers. ethical loan companies.

Talking with him Observer, said ministers must intervene to protect customers who still owe Wonga money by ensuring they are transferred to an ethical provider, with their payment terms the same or improved. These providers could also include community development finance institutions and employer-based loans, but the offerings of major banks should also be expanded.

Sheen said that with rising levels of personal debt across the country, the government should do more to support the development of lower-cost lenders.

Wonga collapsed in administration last week after a series of claims for compensation for improper sales practices, with an estimated 200,000 clients still owing more than £ 400 million in short-term loans. Borrowers have been told to keep making their payments as usual despite the collapse.

“The real danger is that those customers are going to turn to possibly even worse places,” Sheen added. “There is an opportunity here to support fair and responsible credit providers and help them grow enough to handle the number of people who went to Wonga before.”

He warned that unscrupulous companies and scammers would try to exploit Wonga’s clients by pretending to be from the group, and that other high-cost lenders could also act to tempt them with loans.

“A lot of people will seek to exploit those customers,” he said. “Many borrowers will not necessarily know who to turn to for credit now. And of course there is often an association between mental health problems and debt. “

Wonga, who before her humiliating disappearance became a symbol of the domestic debt crisis plaguing Britain, was put into management when its owners decided it could not remain solvent.

The administrators of the Grant Thornton accountants are expected to sell the entire business or parts of its loan book to another loan company. Although there are likely to be many vulnerable borrowers with poor finances and potential health problems among their clients, the servicer is not required to find a responsible buyer. The goal of managing a failed business is to recover as much money as possible for your creditors. “It really is finding someone who can pay your way, rather than a buyer with ethical sensitivity,” said Tim Symes of the London law firm DMH Stallard.

Anti-poverty activists have warned that British households will continue to seek payday loans despite Wonga’s collapse, as tough economic conditions force people to keep borrowing to make ends meet.

According to the charity StepChange, about one in seven people in the UK borrowed money to meet a family need last year, and around 1.4 million turned to high-cost credit providers. Sheen blamed austerity and benefit cuts for driving people into damaging levels of debt, which he said had a massive impact on communities. Ultimately, the state would have to help pay for that damage by spending more on health and public services.

“Look at the results of austerity: cuts in public services, cuts in social benefits. All of this adds up, ”he said. “With a wage contraction that has been the worst since the Napoleonic wars, people cannot afford the basics.

“It’s not just about a loan and debt issue, it’s about how much it costs for utilities to recoup and address the larger cost that people have to deal with.”

The Welsh actor, who has played Tony Blair in three films since 2003, as well as Brian Clough in 2009. The damned united, said supporting ethical lenders should become a priority for the government. In March, Sheen founded the End High Cost Credit Alliance, a campaign group of politicians, charities, and tech companies with the goal of promoting more affordable loans. “There is a lot to learn from Wonga’s example,” he said. “We have to find ways to get the government to support smaller businesses through low-cost capital, while also helping them with high-profile marketing.”

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