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.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Mortgage Administration Team Leader

    Negotiable: Recruitment Genius: This company prides itself on its ability to p...

    Recruitment Genius: Mortgage Advisor

    Negotiable: Recruitment Genius: This company prides itself on its ability to p...

    Ashdown Group: Solvency II Project Manager - 10 month contract - £800 p/d

    £800 per day: Ashdown Group: A highly successful, global financial services co...

    SThree: Trainee Recruitment Consulant

    £20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250...

    Day In a Page

    A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

    A Very British Coup, part two

    New novel in pipeline as Jeremy Corbyn's rise inspires sequel
    Philae lander data show comets could have brought 'building blocks of life' to Earth

    Philae lander data show comets could have brought 'building blocks of life' to Earth

    Icy dust layer holds organic compounds similar to those found in living organisms
    What turns someone into a conspiracy theorist? Study to look at why some are more 'receptive' to such theories

    What turns someone into a conspiracy theorist?

    Study to look at why some are more 'receptive' to such theories
    Chinese web dissenters using coded language to dodge censorship filters and vent frustration at government

    Are you a 50-center?

    Decoding the Chinese web dissenters
    The Beatles film Help, released 50 years ago, signalled the birth of the 'metrosexual' man

    Help signalled birth of 'metrosexual' man

    The Beatles' moptop haircuts and dandified fashion introduced a new style for the modern Englishman, says Martin King
    Hollywood's new diet: Has LA stolen New York's crown as the ultimate foodie trend-setter?

    Hollywood's new diet trends

    Has LA stolen New York's crown as the ultimate foodie trend-setter?
    6 best recipe files

    6 best recipe files

    Get organised like a Bake Off champion and put all your show-stopping recipes in one place
    Ashes 2015: Steven Finn goes from being unselectable to simply unplayable

    Finn goes from being unselectable to simply unplayable

    Middlesex bowler claims Ashes hat-trick of Clarke, Voges and Marsh
    Mullah Omar, creator of the Taliban, is dead... for the fourth time

    Mullah Omar, creator of the Taliban, is dead... again

    I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
    Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

    Margaret Atwood on climate change

    The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
    New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

    New Dr Seuss manuscript discovered

    What Pet Should I Get? goes on sale this week
    Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

    The cartoon hedgehog leading the way into a whole new reality

    Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
    Ants have unique ability to switch between individual and collective action, says study

    Secrets of ants' teamwork revealed

    The insects have an almost unique ability to switch between individual and collective action
    Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

    Donovan marks his 50th year in folk

    The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
    Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

    Simulator recreates thrill of F1 circuit

    Rory Buckeridge gets behind the wheel and explains how it works