The Universities and Colleges Admissions Service has been rebuked by the Charity Commission over its role in the marketing of private loans to students and school-leavers, with the regulator warning that Ucas needs to rein in its commercial arm.

The commission’s intervention followed direct mail and email marketing sent to students last month by Ucas Media – Ucas’s commercial subsidiary – advertising Future Finance, a company offering private loans targeted at students.

After a complaint by Martin Lewis, the consumer finance expert, the commission sent guidance to Ucas’s board, warning of the need to maintain its independence from its non-charitable subsidiary.

A spokesperson for the commission said: “We’ve contacted Ucas to remind them of their obligations towards their charity. It is now for the trustees to consider our guidance and how they manage their obligations in the best interests of their charity.

“More generally, charities hold important positions of trust in society so it is vital that any relationships with non-charitable organisations are clear to those the charity is set up to help.

“The public rightly expect charities to be driven only by their charitable mission and purpose in everything they do. New guidance from the commission makes clear that trustees should work to defend and promote their independence from non-charitable organisations at all times.”

Ucas said its board had met to discuss the commission’s message as well as the complaints from Lewis and students about the mailings.

“Following discussion, we will work with Future Finance to ensure further messages from Ucas Media include clear information on all the funding options available to students, stressing that a government-funded loan should always been the first port of call as well as signal the likely interest rates and terms within the email,” Ucas said in response to Lewis.

“It is important that everyone has access to high-quality information and advice on all aspects of finance relating to higher education, and we will look to strengthen the information and advice we provide through our website, emails and across social media.”

Ucas has previously defended its commercial marketing by saying the communications from Ucas Media were only sent to students who opted in to receive them.

But Lewis, the founder of the MoneySavingExpert website, said he was unhappy with Ucas’s response, and called for it to bar advertising by commercial lenders.

“This is a fundamental error by Ucas. With its privileged position and being seen as an official body communicating with students, Ucas should be whiter than white,” Lewis said.

“The charity has to remember that it is there to help admissions for students, and the fundraising from its commercial arm must be a distant, secondary consideration. But this response shows that it isn’t a secondary consideration.

“I again call on Ucas to drop adverts for commercial lenders. Its reputation and brand among students make people feel that it is some form of official communication. The argument that it’s opt-in only, when dealing with impressionable young people, that’s simply not enough of a protection.”

Lewis argued that because it held unique access to data on students, Ucas needed to be especially careful on who it allowed access to its services.

“I’m not going to say Ucas can’t use advertising at all. But those advertisements must be things that the charity, not the commercial arm, would be happy to recommend to students if it wasn’t being paid,” he said.

“In an era where universities are facing real criticism over dealing with the mental health issues for students, I think it is totally inappropriate for an official university body to be promoting commercial debt that risks exacerbating the stress and mental health of their students.” said Lewis, who chairs the Money and Mental Health Policy Institute.

Eva Crossan Jory, the National Union of Students’ vice-president for student welfare, said Ucas should review its operations to benefit students, with increasing numbers of students now using unsecured loans.

“The impact of this debt can often act as a trigger for mental or physical problems, and often has a knock-on effect on attainment and employment outcomes,” she said.

Ucas said it wanted to meet Lewis “to discuss how we can collectively further support the interests of students”, but Lewis said he did not want Ucas to set the agenda.

“The first point for me will be discussing that it needs to drop these types of advertising,” Lewis said. “Ultimately, the only thing to suggest would be that you treat all information from Ucas with a pinch of salt. It would be a sad state of affairs to have to say that.”

Future Finance said it always advises applicants to check they had made full use of the government support available to them before considering taking out a loan. Olga Dolchenko, the company’s chief executive, said it never encouraged students to borrow more than they could afford.

Ucas is governed by trustees dominated by university vice-chancellors. Its income is largely derived from £24 application fees paid each year by hundreds of thousands of prospective undergraduates seeking places at UK higher education institutions, and fees from universities for acceptances.

Ucas Media, the commercial subsidiary, donates its profits to the parent charity. “We don’t receive any direct financial support from the government, so our commercial activities help us deliver our charitable objectives, whilst keeping costs down for students and education providers,” Ucas states.

In 2018 Ucas received £27m in fees, including nearly £14m from applicants. Ucas Media reported income of £19m, of which profits of £4.3m was paid out to Ucas via gift aid. The company spent £4.7m on administration costs and more than £6m on distribution. Ucas Media also spent £3.8m on a “brand and data charge” that appears as income in the main Ucas accounts.