Leonard Curtis, a business restructuring and advisory firm appointed to handle Fernwood's liquidation, confirmed that existing borrowers will not have to make any further payments.

The UK's Financial Conduct Authority (FCA) also issued a formal warning in late June about the debt cancellation for Fernwood's customers.

However, the FCA noted that some individuals impersonating Fernwood employees have defrauded borrowers. "If you receive an unexpected call from someone claiming to be from Fernwood, hang up immediately," the FCA advised, while also opening a support hotline from 1/7.

The collapse of a company wiping out debt for thousands is extremely rare. Photo: Ibtimes

Fernwood specialized in high-interest payday loans, sometimes exceeding 600% annually. A £200 loan could accrue up to £150 in interest in just three months. The debt cancellation is estimated to affect approximately 10,000 customers, providing significant relief amid the cost of living crisis and rising energy and food prices.

However, Fernwood's creditors stand to lose around £5 million, with about 40 employees facing potential job losses, while the short-term credit market faces further instability.

Freddie Winter, a financial expert in the UK, stated that "having debt completely erased when a company goes bankrupt is incredibly rare." Usually, loans are sold to another company, and borrowers remain liable. "These customers are truly fortunate. Hopefully, they will use this opportunity to improve their finances, instead of continuing to rely on payday loans," he said.

Winter advised that short-term loans should only be a last resort. "They are advertised as a friend in times of need, but they are actually the devil of personal finance," he emphasized.

Before borrowing, consumers should consider cutting expenses, finding additional income, and negotiating with service providers or landlords. If borrowing is unavoidable, a plan for rapid repayment should be in place to avoid further financial burden.

Bao Nhien (Metro)