CAMPAIGNERS celebrated this week after the payday lender Wonga collapsed into administration.
The Financial Conduct Authority (FCA) announced the insolvency online, on Thursday of last week. It would continue to supervise Wonga and was in close contact with the administrators regarding the “fair treatment” of customers, a notice states.
About 200,000 people still owe short-term loans of more than £400 million.
“Customers should continue to make any outstanding payments in the normal way,” the notice stated. “All existing agreements remain in place and will not be affected by the administration. However, the firm is no longer able to issue new loans.”
Frank Field MP, who resigned the Labour Party whip last week, has written to the Archbishop of Canterbury asking that the Church Commissioners assemble a consortium to buy Wonga’s portfolio of loans to prevent customers from being exploited by debt-recovery companies.
“The Wonga loan book will be sold and, if past record is any guide for the future, they will be sold at knockdown rates,” Mr Field wrote. “Within these loan books will be some I assume devoted exclusively to their exploitation of the poor. Is there a possibility please of you asking the Church Commissioners quickly to assemble a consortium of good people with money who will attempt to buy those poor people’s loan books at a knockdown price?”
A spokesperson for Lambeth Palace told The Times that the Archbishop was considering the proposal. “We are reflecting on the letter from Frank Field to help determine what may or may not be possible in the months ahead regarding the repercussions following Wonga’s collapse.”
The collapse has been attributed to public criticism of the company, which led to a flood of compensation claims. This was confirmed in a statement on the company website: “Despite efforts to restructure the business, which included an injection of funding by the Group’s shareholders, the business was unable to be restored to profitability due to the level of redress claims.”
Wonga was known for its TV adverts featuring elderly puppets which, critics said, lured vulnerable customers, including elderly people and struggling families, into taking out small loans with sky-high interest-rates that left recipients with irreversible debt.
Interest rates had reached more than 5500 per cent before the Government enforced a credit cap of 1500 per cent in 2015. The campaign to change the law was brought by Citizens UK in 2009, after concerns were raised by its network of churches and communities.
The executive director of Citizens UK, Neil Jameson, said of the eventual collapse: “Very few people will shed a tear for Wonga: people do need access to short-term loans but they deserve ethical lenders like credit unions which are rooted in the community, not payday-lender sharks seeking to make a quick buck off the back of people’s misery.”
A leader from St John’s, Hoxton, in London, Colleen Beasley, was among the first to tell Citizens UK of her experience. She explained: “I became involved in the campaign for a cap on credit because I myself was a victim of these charges.
“It’s an embarrassing situation to find yourself in, but the relentless charges and fees meant my original, relatively small debt quickly spiralled out of control. Being in debt and knowing that the debt is growing is a frightening experience which has a serious influence on your well-being.”
Citizens UK organised protest gatherings led by faith leaders, and lobbied politicians to introduce a cap on interest rates. This was a theme at the 2010 General Election Assembly, backed by the then Bishop of Stepney, the Rt Revd Adrian Newman.
The campaign gained momentum after the ethics of Wonga were heavily criticised by the Archbishop of Canterbury in the House of Lords soon after his appointment in 2013 (News, 2 August 2013). In a subsequent interview, Archbishop Welby said that he intended to “compete it out of existence” — a claim which became known as his “war on Wonga”.
This was briefly undermined when it was discovered that the Church Commissioners had investments in Accel Partners, a private equity group that helped to launch Wonga; the Commissioners disinvested following year (News, 26 July 2013; 11 July 2014).
Archbishop Welby went on to appoint a former chief executive of FCA, Sir Hector Sants, to lead a two-year task group on responsible credit and savings (News, 12 February 2016).
Sir Hector established the Church Credit Champions Network, funded by the Church Urban Fund and run by the Contextual Theology Centre, and later the Just Finance Foundation, a charity that offers “affordable and responsible” credit and financial services (News, 30 May 2014; 16 September 2016).
Writing in the Church Times comment section earlier this month, the executive director of the Just Finance Foundation, Rowena Young, said that the Archbishop’s intervention had “served only to illuminate how deep and systemic financial exclusion and distress in the UK have become”.
Responding to collapse, she said on Tuesday: “The spectacular demise of payday lender Wonga is the first step towards a fairer financial landscape. Wonga is dead, and so too is their practice of leaching hard-earned funds from poor communities.The model has been proven unviable in a tightened regulatory context. Investment in similar models is toxic.
“But as two million people earn the minimum wage, millions more are underemployed and their numbers swell, short-term credit remains a lifeline.The question now is where Wonga’s customer base will get it.
“As administrators rake over the wreckage at Wonga, the Just Finance Foundation embarks on an initiative to mobilise new sources of investment and support. . . If there is a silver lining to Wonga’s fall, it will be that the growing number of organisations that share this mission — they are massing — will be spurred to greater resolve and greater urgency. As Justin Welby said, inclusive providers can out-compete exploitative lenders. Let’s make sure they do.”
A spokeswoman for Lambeth Palace said that the Archbishop would not be commenting on the collapse.