U.K. Student Lender Follows Wonga Ban on Misleading Debt Letters

The U.K. Student Loans Company has followed payday lender Wonga.com Ltd. in saying it will stop sending letters that appear to be from a debt collection agency and threatening legal action.

The company, which is owned by the government, was set up in 1989 to provide loans to students. In a statement on its website, it said it had been sending letters apparently from “Smith, Lawson & Company” since 2005 to debtors who were at least three months in arrears.

The letters referred to the Student Loans Company as a “client” and threatened legal action. Small print at the bottom of the letter said Smith, Lawson & Company was a trading name of the Student Loans Company.

Following a Financial Conduct Authority investigation, Wonga agreed last month to pay more than 2.6 million pounds ($4.5 million) to customers who received fake legal letters. The Student Loans Company decided June 27 it would stop all Smith Lawson letters.

“It is important that the government recovers taxpayers’ money but it must do so in a way that is fair,” Tariq Ahmad, a government business spokesman, told the House of Lords in London today. “It must not use misleading tactics to get people to do the right thing. The Student Loans Company has now stopped issuing letters under the Smith and Lawson brand and we are speaking to them to ensure lessons are learned.”

Business Secretary Vince Cable will meet company representatives to discuss the letter, his office said.

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