Archbishop of Canterbury Justin Welby rows back on war on Wonga: ‘Loan sharks are worse’

Archbishop embarrassed over revelation Church  of England invests in payday lender

Personal Finance Editor

The Archbishop of Canterbury has backtracked on claims he intended to “compete” Wonga out of business, saying that there are plenty of others  working in the sector which are “much worse”.

In an interview on BBC radio, the Most Rev Justin Welby instead praised Wonga, saying that it “is actually a very professionally managed company. Errol Damelin, the chief executive, is a very clever man, runs it extremely well.”

But he admitted his embarrassment after being told that the Church of England invests in the payday lender – albeit indirectly through its pension fund and just £75,000 out of a total investment fund of £5.2bn.

“These things do happen,” he said. “We have to find out why and make sure it doesn’t happen again.”

He said he was unhappy that Church funds were being funnelled into Wonga. “They shouldn’t be investing in Wonga. We don’t think that’s a good thing,” he said. According to Church policy, no such investments should be made, he added. However he told Today: “I don’t think capitalism is necessarily amoral.” This paves the way for the Church to get more heavily involved in finance.

The Archbishop spoke out against the introduction of a cap on loan charges, as proposed by many anti-payday loan campaigners.

He said: “If we try and cap interest rates and drive the legal payday lenders through regulation, people – because they’re desperate and there’s no consumer choice in a lot of deprived areas – will end up with the loan sharks, which are just a totally different kettle of fish, very much worse.”

But Rev Welby admitted that the current restrictive rules that credit unions work under would have to be changed to allow them to compete with payday lenders. He suggested that the Church’s research showed that a workable interest rate would be around 80 per cent, much higher than the existing rates credit unions are allowed to charge to borrowers.

The Archbishop said: “We think you can probably do it [loan cash to hard-up people] for an equivalent annual rate of about 70 or 80 per cent. It’s a huge sum of money but it’s better than 5,500 per cent.”

Credit unions are currently only allowed to charge 2 per cent interest per month – the equivalent of 26.8 per cent APR. But the Government last month proposed to increase the interest rate cap to 3 per cent a month, to allow credit unions to offer affordable credit to those who otherwise may turn to rip-off deals.

The change – which is planned for next April – will mean the APR on credit union loans could climb as high as 42.6 per cent. But that’s still far below the figure proposed by the Archbishop, which suggests any plans he has are still in the putative stage and some years off.

However, credit unions welcomed the focus on the sector. Mark Lyonette, chief executive of the Association of British Credit Unions, said: “Many credit unions help members to escape from the high-cost trap of payday lending, repay over a more affordable period of time and get their finances back in order.”

He also embraced the opportunity to get the support of the Church. “The wide community reach of the organisation and the skills within its congregations mean it is one of many groups that can help raise awareness of the benefits of credit unions and help them to grow.”

He revealed that the credit union industry is talking to the Church of England about how the two organisations can work together. 

“The more people who use credit unions, the more successful they will be,” he said.

Credit unions: How they work

The Church is the latest organisation to suggest that credit unions could be boosted to help tackle the rise of predatory payday lenders. The last to do so was the Government itself, which handed the sector £36m earlier this year to help them become more competitive.

Credit unions are non-profit co-operatives run by and for the benefit of members. They aren’t specifically loan companies – they lend money to members who have already saved with them.

The financial figures for the sector in the UK show that £807m is saved in British credit unions while £627.5m is out on loan to members. Membership is usually limited to people who share a common link like living in the same area, working for the same employer, or, indeed, belonging to the same church.

Credit unions, currently used by about one million people, offer a range of products from current accounts to life insurance - but it is their ability to provide low-interest loans to members that is attracting all the attention at the moment.

Emma Watson has become the latest target of the 4Chan nude hacking scandal
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
David Moyes and Louis van Gaal
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
Life and Style
Arts and Entertainment
Tennis player Andy Murray's mum Judy has been paired with Anton du Beke for Strictly Come Dancing. 'I'm absolutely delighted,' she said.
tvJudy Murray 'struggling' to let Anton Du Beke take control on Strictly
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
Arts and Entertainment
Worldwide ticket sales for The Lion King musical surpassed $6.2bn ($3.8bn) this summer
tvMusical is biggest grossing show or film in history
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
food + drink
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Quantitative Risk Manager

    Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

    Day In a Page

    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits