A DERBY money expert has said she hopes that other payday loan companies will heed new lending guidelines after Wonga was made to write off the debts of hundreds of thousands of customers.
The controversial short-term lender has agreed to write off the debts of 330,000 customers whose loans would not have been approved under new affordability guidelines set out by the Financial Conduct Authority.
A further 45,000 customers will not have to pay interest on their loans.
The company, which has faced criticism for its debt collection tactics, said the new checks have been implemented after discussions with the regulator.
It is estimated that the move will cost Wonga, which recently reported a 53% dip in annual profits, £220 million.
Gillian Bhalla, money advice supervisor at the Citizens Advice Bureau and Derby Law Centre, said that the move sent out a message to other payday lenders.
She said: "I welcome the news that Wonga is being more tightly controlled. It sends out a message to other payday lenders that they need to be much more aware of the guidelines.
"The public needs to be aware that this type of borrowing is fine if you are in a position to pay the money back. But if you are already struggling on a low income or on benefits then there's a big risk that your debts could spiral out of control.
"It is a quick fix but causes money problems to get worse for some of the most vulnerable in society."
According to Mrs Bhalla, the number of people approaching Citizen's Advice in Derby with payday loan issues has been falling.
She said: "That said, as we approach Christmas there will be more, because people do not want their children to go without.
"The biggest problem has been what's called continuous payment authority, which allows payday loan companies to take money directly out of people's bank accounts.
"That has caused a lot of hardship for our clients. It is in the small print that only the lender can cancel the payment.
"The new guidelines from the FCA means that lenders have to carry out means testing to assess affordability."
Wonga said it would contact borrowers by October 10 to notify them if they will be included in its redress programme.
Derbyshire County Council's leader, Councillor Anne Western, has suggested that people struggling with debt should turn to credit unions for help.
Credit unions are not-for-profit financial cooperatives run locally by local people and offer savings as well as loans at lower rates than many high street lenders. They encourage people to save, as well as offering access to instant loans of amounts up to around £500.
