By Will Roberts
Payday lender Wonga has defended itself after being accused of over-the-top fees for those who default on loans.
Consumer group Which? said that lenders such as Wonga are "exploiting" borrowers who risk falling into a debt spiral because of the inflated fees.
However Wonga argues that its £30 charge reflects the cost to it of someone defaulting on payments.
Lenders' default fees examined
Which? examined the default fees charged by 17 payday lenders, including Wonga, which had the most expensive charge.
Four out of the 17 had charges of over £25 while 10 had a charge of £20 or more.
MoneyShop.tv charges customers a £29 fee for failing to repay the loan on the due date, however others, such as Quickquid.co.uk, were much less, at £12.
Wonga said its one-off £30 fee reflects the additional costs incurred by the company and that the move had been independently assessed by a business advisory service.
A statement from Wonga said: "As with all our costs, we are completely transparent about our default fee.
A clear message to customers says Wonga
"It's clear to customers when they apply for a loan and at least three further times before their repayment date.
"On the rare occasions where people can't repay, we always encourage them to get in touch with us so we can do everything we can to agree an affordable repayment plan.
"This includes freezing interest and charges."
Which? however, says the charges are unfair and has written to lenders to challenge them on the subject, saying the costs should be no more than the admin costs of a default.
The group says excessive default fees are unlawful under the Unfair Terms in Consumer Contracts Regulations 1999.
High fees for defaulting on a loan criticised
These state that it is unfair for lenders to charge a disproportionately high fee if borrowers default on a loan.
In 2006 an Office of Fair Trading (OFT) decision ruled that penalty charges for credit cards should be no more than £12, unless there are exceptional factors.
Richard Lloyd, executive director at Which?, said: "We believe payday lenders are exploiting borrowers with excessive fees which can push them even further into debt."
Which? says that payday lenders are using the default fines to push down their headline rates, but in doing so they are misleading customers to think that the loans are cheaper and more affordable.
Later this year the new Financial Conduct Authority (FCA) will regulate the actions of payday lenders.
Call for a cap on level of default fees
Which? has called on the group to introduce a cap on the level that firms can charge in default fees, as part of a cap on the total cost of credit planned for January 2015.
A spokesman for the FCA said: "We welcome Which?'s interest in this area and we are already considering default fees as part of our work on capping the total cost of credit."