Student Loans Company uses Wonga-style fake legal letters: Business invents firm to harass graduates who are behind with repayments

Student Loans Company has been accused of using 'Wonga tactics'



Fictional firm invented to harass graduates who are behind in repayments

Revelation triggers call for police inquiry into use of controversial tactic



The official Student Loans Company has been accused of using ‘Wonga tactics’ to harass thousands of graduates who are behind on their repayments.



It has invented a fictional firm – Smith Lawson and Company Recovery Services – which adopts the same threatening language as private debt firms and solicitors to chase payments.



The tactic appears similar to an approach taken by the payday lender Wonga, which was last week ordered to pay £2.6million in compensation after sending letters to thousands of customers from made-up debt recovery firms.



The Student Loans Company is a subsidiary of the Government and reports to Vince Cable's Department for Business, Innovation and Skills

Both sets of revelations have triggered calls for a police inquiry into what appears to be evidence of mis-representation and harassment.



Warnings sent by ‘Smith Lawson and Company’ to graduates for the last nine years carry a banner in red stating ‘Do Not Ignore This Letter’, with a demand for payment within seven days and a threat of legal action.



They gave the impression of a separate company with the line: ‘We are instructed by our client, in connection with the sum outstanding shown above.’



But the supposed firm does not exist and is little more than a masthead designed to intimidate.



The Student Loans Company (SLC) is a subsidiary of the Government and reports to Vince Cable’s Department for Business, Innovation and Skills.



Threat: An extract from the letter sent to graduates

The firm said it introduced Smith Lawson as a ‘cost-saving exercise’ because the use of conventional debt collection agencies required payment of commission.



Last week City watchdog the Financial Conduct Authority (FCA) revealed Wonga would have to pay £2.6million compensation to 45,000 people sent letters from two invented debt recovery firms.



Subsequently, City of London Police said it would investigate whether the lender and its millionaire founders had committed any criminal offences under a number of possible headings.



These range from the Fraud Act – which states it is a crime to dishonestly make a false representation intending to make a gain or cause loss to another – and the Administration of Justice Act, which protects those in debt from harassment.



There are also possible offences under the Solicitors Act of 1974, which makes it an offence for someone to falsely imply they are a solicitor, and sections of the Theft Act which cover demanding money with menaces.



Consumer groups and lawyers say any evidence a government firm is adopting the same tactics at Wonga should mean it is also brought into the police investigation.



The SLC has been sending out warning letters under the Smith Lawson name since at least 2005, suggesting tens of thousands will have been issued, not least because the number of former students who are in arrears is rising sharply.



The bullying approach was backed up in Smith Lawson’s training manual which told staff that if people refused to pay ‘then the threat of legal action should be used’, including seeking a County Court Judgment.



It advised: ‘The threat of a Debt Collection Agency should also be used, explaining that someone could actually call round to speak to them personally.’



The total amount owed by all students ballooned to £54.4billion in 2013/14 following the introduction of £9,000-a-year tuition fees in 2012. At the same time, the arrears soared from £12.7million to £38.2million.



Last week City watchdog the Financial Conduct Authority revealed Wonga would have to pay £2.6million compensation to 45,000 people sent letters from two invented debt recovery firms

Last night Marc Gander, founder of the Consumer Action Group, said: ‘When we find that Wonga tactics are being used by a lender which is so close to government … it shows very clearly how out of control the lending industry really is. We can only hope that the Student Loans Company faces a criminal investigation as well.’

