An eighteen-year-old with mental health problems killed himself after pay-day loan firm Wonga cleared out his bank account, a coroner has ruled.
After Kane Sparham-Price reached 18 and left local authority care, he took out several loans from Wonga in an attempt to raise enough money for a deposit on a flat.
But - perfectly legally, under the terms of his loan - Wonga withdrew the entire contents of his bank account through what's known as a continuous payment authority (CPA). This left him penniless, and unable to borrow any more money elsewhere.
South Manchester coroner John Pollard has now written to the Financial Conduct Authority (FCA) saying that this shouldn't be allowed to happen.
"Whilst I accept that the various pay-day lenders are legally entitled to 'clear out' someone's bank account if money is owing to them, it struck me that there ought to be a statutory minimum amount which MUST be left in an account (SAY £10) to avoid absolute destitution; and as I understand you set and regulate the rules, you might look at this with a view to preventing further deaths," he wrote, the Disability News Service reports.
But in the FCA's response, chief executive Martin Wheatley said this plan would be 'undesirable'.
"The ability of lenders to access a consumer's bank account to ascertain what residual balance may be available would raise significant concerns about privacy," he wrote.
"In practical terms it might not be effective as by the time a find transfer is processed (later that day) there is no guarantee that other payments will not have depleted the balance on the account in the meantime."
He added that the FCA has already taken action to curb the use of CPAs, as part of new rules on pay-day loans. Lenders now aren't allowed to make more than two attempts to take money from a customer's account, nor use one to take a part-payment, meaning that people are now less likely to find their accounts cleared out.
Since the new rules came in in April, Citizens Advice says it's been receiving half as many requests for help with pay-day loans as before.
"Following concerns raised by Citizens Advice the regulator and government made a concerted effort to tackle payday lenders. Similar efforts are required for other high-cost credit companies," says its chief executive Gillian Guy.
But, she adds: "With a history of causing serious harm to borrowers, payday lenders still need to be kept under a watchful eye."
It's worth noting that, according to Citizens Advice, as many as a quarter of pay-day loan customers would be able to get a loan from a bank instead - a much cheaper option.