A NEW mood of penitence could be detected at Wonga, the payday
lenders, this week.
On Tuesday, the company's new chairman, Andy Haste, said: "Some
serious mistakes have been made. The company admitted those
mistakes, and it has apologised for those mistakes. I know that we
need to repair our reputation, and regain our right to be an
accepted part of the financial-services sector."
As part of his shake-up, he said that the use of puppets in
television advertisements (above) would end. "I am going
to be reviewing all of our advertising and marketing, to make sure
that we don't leave any impression that we are trying to influence
or target the very young or the vulnerable." He said that his
reforms would bring about a drop in profits (£60 million in the
last financial year).
His statement was made a few hours before the Financial Conduct
Authority (FCA) announced its plans to introduce a cap on the
amount that payday lenders can charge, to come into force in
January 2015. Loan rates should be capped at 0.8 per cent a day of
the amount borrowed, it said.
Borrowing £100 would cost a maximum of £124, if paid back within
a month. Those who fail to pay back the loan within that time can,
in future, be charged no more than 100 per cent of the original
sum. There will also be a cap on default charges.
The FCA estimates that payday companies will lose £420 million a
year if these changes are introduced, amounting to 42 per cent of
their present revenue. In response, the payday industry warned that
the changes would force more people to turn to loan sharks.
Wonga has agreed to pay £2.6 million in compensation to
customers that it pursued with fake legal letters.
By Paul Handley
THE Church Commissioners announced last Friday that they have
successfully extracted themselves from their financial stake in
Wonga, the payday lenders criticised last July by the Archbishop of
His criticism of Wonga for charging vulnerable people high rates
of interest (News, 26 July 2013) was
undermined by the revelation that the Church of England had a
financial stake in the company, albeit an indirect one through a
venture-capital portfolio holding.
The nature of a portfolio investment is that it is viritually
impossible to alter the terms during the period of the investment.
In Friday's announcement, the Church Commissioners stated: "The
Church Commissioners estimate that, if they had had to sell their
entire venture capital holdings, they might have lost £3-9 million
to remove the exposure to Wonga, which was worth less than
The announcement continued: "The Commissioners are pleased that
another way forward has been agreed, given their fiduciary duties
to clergy pensioners and to all the parts of the Church they
It also makes clear that the Commissioners have ensured that
they have made no profit from their indirect holding in Wonga. The
nature of the deal remains confidential, but it is said to be
In its recent annual report, the Ethical Investment Advisory
Group (EIAG) explained that "Pooled funds are often the only way to
access certain asset classes and investment strategies - including
venture capital, which can not only increase financial returns for
investors, but also serve society." The Wonga exposure had arisen
in a pooled fund "which could not be screened in the way that
direct holdings are screened".
It is believed that, by declining to take any profit from their
Wonga holding, the Commissioners have signed away a six-figure
Edward Mason, the newly appointed Head of Responsible Investment
at the Church Commissioners, said on Friday that having an ethical
approach to investments came at a potential cost.
"It is calculated that, in recent years, the ethical investment
policy has cost the Commissioners about 0.2 per cent in lost
profits annually," he said. "This might not seem much, but, given
the size of the Church's investments, we forgo several million
pounds a year by having such strict exclusions about what we will
"It's a balancing act, given our responsibility to fund clergy
pensions and other church activities, and we monitor it very
closely, but it is the right thing to do."
When the Wonga holding was revealed last July, Archbishop Welby
admitted that he was "embarrassed" and "irritated" by the news. The
Archbishop has no direct control over the Church's investments -
the responsibility of the Commissioners' assets committee - but it
is known that he has been putting pressure on them in recent
In an interview for the BBC's Andrew Marr Show, to
be broadcast on Sunday, he said: "I have been absolutely clear that
I do not believe that the rates of interest charged by these
companies are ethical and moral - they are legal, but they are not
ethical or moral.
"I can obviously apply pressure, encouragement, and I've tried
to do that. I'm absolutely delighted that we are now out of Wonga,
and have taken no profit from it."
The EIAG is currently drawing up policy advice about investment
in pooled funds. There has also been a tightening-up of direct
holdings in companies that make a proportion of their profits from
excluded areas such as alcohol and gambling. A threshold of 25 per
cent has been reduced to ten per cent.
Correction: In our story aboutthe EIAG annual
report (News, 4 July), we
stated that the EIAG was defending the holding in Wonga. We accept
that this was a misrepresentation of the report's general defence
of the EIAG's approach to ethical investment. Direct investments
can be used to improve the ethical practices of the companies
invested in. Thisis not the case with indirect investments through
pooled funds. We apologise for the error.