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 a significant sum in
Accel Partners, a private equity group that helped to launch
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 the 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 Radio Four's Today
programme that the Church was "not trying to set up a rival set of
companies or credit unions" but considering what it could do to
support the community finance sector in becoming "much more
He suggested that the Church could tackle obstacles to the
further expansion of credit unions: a lack of appropriate expertise
and dearth of outlets. It had "quite a lot of fairly expert people,
not always in the right place" and 15,000 buildings.
It was already in the process of setting up a credit union for
clergy and staff in the Church of
The Archbishop has been an outspoken critic of lending in both
the mainstream financial and payday-loan sectors (News, 15 March).
Last year, he described in the House of Lords how credit unions in
his "greviously underbanked" diocese of Durham had "made good
finance and access to credit available in an extremely deprived
area" (News, 21 December). He noted
that the Church of England had branches in every community,was
"rather good" at handling money, and needed to "get involved and
contribute to this in a powerful and effective way". He told
Total Politics that this would be a "decades long
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 (all are requested by the customer and none can
be extended more than three times). It charges interest of one per
cent a day, and its typical loan is £200 for 15 days.
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
Papiss Cisse, a footballer who plays for Newcastle United, has
refused to wear the team's strip branded by Wonga, citing his
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."