The payday loan lender Wonga recently revealed plans to write off some of its worst debts, amid a climate of increasing calls for responsibility when approving high-interest, short-term loans.
Payday loans are a last resort for many people, but are by no means a ‘get out of jail free’ card, attracting high rates of interest if they are not repaid within a few days as the product is intended to be.
Wonga recently announced it will write off 330,000 customer debts with arrears over 30 days – equivalent to £220 million – along with a further 45,000 customers with lesser arrears who will have their interest and charges cancelled.
But this raises the question of whether this gesture is fair on those customers who have worked hard to repay their debt in full – particularly those who have paid large amounts of interest as a result.
Mintel surveyed consumers and found that, despite media pressure on the payday loan sector, the public are not so quick to forgive those who have run up substantial debts.
The majority (51%) of those surveyed actively disagreed with the suggestion that people who can no longer afford their debts should not be expected to repay them; just 27% of people thought this was a fair suggestion.
Even among people in financial difficulty, 34% said it is fair that some people find their repayments unaffordable, and only a slightly larger 40% thought repayments should always be affordable, no matter what.
“Some of the consumers in this group are likely to have struggled with debt repayments at some point, or may still be struggling,” wrote Mintel’s Rich Shepherd.
“However, over a third think that debts should be repaid regardless.”
It’s an indication of the extent to which the public as a whole support the notion of debtor responsibility, even among those who are debtors themselves.
And for those in business, it is perhaps a reassurance that pursuing overdue debts for repayment will not have negative reputational impacts – in fact, your customers may be more supportive of such an approach than you realise.