THE Archbishop of Canterbury has vowed to force Wonga, the
payday lender, out of business, by using the Church of England's
resources to bolster the country's credit-union movement.
But his campaign was damaged on Thursday when it was discovered
that the Church Commissioners had invested in Accel Partners, a
private equity group that helped to launch Wonga.
On Friday, the Archbishop told Radio Four's Today
programme that he was "embarrassed" and "irritated" by the news -
uncovered by the Financial Times - but that he had "no illusions"
about the complexity of investment.
Lambeth Palace said that they had been unaware of the
investment. "We will be asking the assets committee of the Church
Commissioners to investigate how this has occurred and to review
The Archbishop told Total Politics magazine, while at
this month's General Synod, that he had had a "very good
conversation" with Wonga's chief executive, Errol Damelin: "I said
to him quite bluntly we're not in the business of trying to
legislate you out of existence, we're trying to compete you out of
existence. He's a businessman; he took that well."
On Thursday, Dr Malcolm Brown, director of Mission and Public
Affairs at the Church of England, told Today that the
Church was "not trying to set up a rival set of companies or credit
unions" but could support the community-finance sector in becoming
"much more robust" by providing expertise and using its 15,000
buildings to address a dearth of outlets.
The Church was already in the process of setting up a credit
union for clergy and staff in the Church of England.
On Friday, the Archbishop confirmed that £75,000 of the Church
Commissioners fund of £5.5 billion had been invested in Wonga
"through an indirect holding".
"It shouldn't happen, it's very embarrassing, but these things
do happen," he said. "We have to find out why and make sure it
doesn't happen again."
The Church of England Ethical Investment Advisory Group (EIAG)
recommends against investment in any company that derives more than
25 per cent of its revenues from "high interest rate lending" (the
same applies to tobacco, gambling, alcoholic drinks, and human
The Archbishop said that his own view was that this was
"probably too high a level. . . I think we have to review these
levels and make sure that we are consistent between what we're
saying and what we're doing."
However, citing the "complexity" of the markets, he argued that
"If you exclude any contact with anything that directly or
indirectly at any point gets you anywhere bad you can't do anything
The Church of England would not itself be investing in credit
unions, he admitted, because "it's a business model that we can't
quite see how you can make work well".
By supporting the sector, the Church could "put our money where
our mouth is", he argued: "If we can't get it right, then we don't
do it, that's the answer. But it's better to a have a go than just
to stand and wring your hands and say 'it's all terrible'. . . We
get it wrong plenty often, we're fallible as anyone. We don't stand
on the sidelines, on some kind of great podium, lecturing everyone
else, that's just not how it works."
The Archbishop has been an outspoken critic of lending in both
the mainstream financial and payday-loan sectors (News, 15 March). He
told Total Politics that expanding the credit-union
sector would be a "decades-long process".
There are currently 400 credit unions in Britain, serving just
two per cent of the adult population, compared with Ireland (75 per
cent) and the US (44 per cent). Nine credit unions have collapsed
this year, taking the total in the last two years to 21.
In April, the Government announced that it would invest £38
million to "modernise and grow" the sector.
Asked about Archbishop Welby's comments, the Chancellor George
Osborne told the BBC: "We are now regulating the [payday] sector. I
am all in favour of credit unions and all sorts of other channels
to allow families to get credit. I want to see as many options for
families as possible."
On Thursday, Mr Damelin of Wonga said of his meeting with the
Archbishop: "There is mutual respect, some differing opinions, and
a meeting of minds on many big issues. On the competition point, we
always welcome fresh approaches that give people a fuller set of
alternatives to solve their financial challenges. I'm all for
better consumer choice."
Some financial commentators have defended Wonga in recent weeks,
arguing that it is more transparent than banks or credit-card
providers. The company says that it is "only interested in lending
to people who we believe can afford to repay us without undue
financial stress". Its website home page allows customers to select
a precise amount to borrow (up to £400), and length of repayment
(up to one month) and shows the total cost of repayment.
It rejects 60 per cent of applicants, the default rate on its
unsecured personal loans is 7.5 per cent, and nine per cent of
loans are extended, at the customer's request. None can be extended
more than three times. It charges interest of one per cent a
If the repayment date is missed, interest will continue to
accrue for up to 60 days at which point the balance is frozen.
An online video explains how an annual percentage rate (APR) -
of 5853 per cent in the case of Wonga - is calculated. The company
argues that APR was not designed with short-term loans in mind and
its rate is based on the assumption that the loan is extended
several times during a year and never paid off.
A review of the payday-lending sector conducted by the Office of
Fair Trading (OFT) earlier this year found that about a third of
loans in the sector are repaid late or not at all. In June, the OFT
referred the market to the Competition Commission, after expressing
concern about "deep-rooted problems with the way competition
The Archbishop said on Friday that it had not been his intent to
single out Wonga, which was a "very professionally managed company
. . . There are plenty of others much worse."
The Archbishop was not the only character in the Wonga story to
be embarrassed this week. Papiss Cissé, a footballer who plays for
Newcastle United, who had refused to wear the team's strip branded
by Wonga, citing his Muslim beliefs, agreed to put it on this week,
after photos emerged of him visiting a casino.
From Angela Tilby's Church Times column last week (Comment, 19
"Here's an idea. Credit unions make a real difference to those
who are on the edge of survival. A credit union has just been
launched to help the clergy. It's a shame that it started this way,
but the Archbishop has suggested that the Church could build on
this, using church halls as a base for local credit unions, as an
alternative to pay-day loans.
"If this really worked, and the Church facilitated a network of
credit unions, it could put the loan sharks out of business. Forget
about bums on pews. Humility, like charity, begins at home."