Struggling Mansfield and Ashfield residents urged to stay clear of pay day loan companies

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Residents struggling with debt are being urged by Derbyshire County Council to turn to credit unions for help instead of high risk borrowing after a leading payday loan company was ordered to pay compensation for ‘unfair and misleading’ debt collection practices.

The Financial Conduct Authority (FCA) has ordered Wonga to pay out more than £2.6m to 45,000 customers in arrears after sending them letters from non-existent law firms.

The letters threatened legal action but the law firms were false. In some cases Wonga added fees for these letters to customers’ accounts.

The county council is encouraging residents to use credit unions as an alternative source of safe, affordable loans and is continuing its work to support the local network.

Earlier this year the council approved £360,000 to help credit unions provide loans to more residents on low incomes and opened up collection points at some of its libraries making it easier for people to visit.

Coun Anne Western, Derbyshire County Council leader, said: “When people are struggling to make ends meet any offer of money to get them through the week can be tempting.

“But these quick financial fixes can come at an extremely high cost and it is sadly financially vulnerable people who can afford it the least who are preyed on the most.

“We want to help people struggling with debt and low incomes to get back on their feet and credit unions can help them avoid the need to risk taking out short-term high-cost credit.

“Derbyshire’s credit unions do an invaluable job and their work has a positive knock-on effect on local communities. That’s why we’re supporting them and why I’d urge people struggling with money worries to turn to them first for advice and support.”

Wonga has apologised to the FCA and said it had stopped sending out the letters four years ago. The FCA said Wonga’s misconduct was particularly serious because it made the situation worse for customers who were already struggling with arrears.