Church of England to take on high-interest payday lendersSeptember 2013
The Church of England is to investigate how it broke its own ethical rules and invested indirectly in a high-interest payday lender.
At the same time the church will go through its books for any other investments that compromise its standards.
The investigation follows an embarrassing blunder by the Archbishop of Canterbury, the Most Rev Justin Welby, when he showed reservations about the lender Wonga, which imposes extremely heavy interest charges on payday loans – only to find the church had placed more than £1m ($1.56m, €1.17m) in that loan company via a third party.
The money is channelled through the US capital investment consultancy Accel Partners, one of Wonga’s biggest investors.
The church’s financial policy is to black companies engaged in pawnbroking and payday lending, the practice of selling short-term expensive loans to carry stretched consumers through to their next wage payment, often leading them into deeper debt.
The church says it will now withdraw its Wonga holding. Welby, meanwhile, has suggested that the church will revise its rules allowing investment in companies that gain up to a quarter of their revenues from high-interest lending.
Before learning of the investment, Welby told the Wonga founder Errol Damelin the church intended to “compete” his company out of business by encouraging clients to use credit unions.
Afterwards he insisted he was not singling out Wonga. He even praised Wonga for its professionalism and suggested it was far from the worst loan offender.
However, he said of the church’s finance officials: “They shouldn’t be investing in Wonga. We don’t think that’s a good thing.
“We need to provide a proper alternative to these very, very costly forms of finance.”
Nevertheless, he emphasised the difficulty of finding investments that were not tainted to some degree. He observed: “If you exclude any contact with anything that directly or indirectly gets in any way bad, you can’t do anything at all.”
Boris Johnson, the mayor of London, called Welby’s stance “an interesting interpretation of the gospels”.
Johnson said: “Wonga is a perfectly legitimate business but there’s no doubt their rates are usurious. There are people who find it very, very difficult to repay the loans once they get into trouble.
“He’s not turning over the tables of the money-lenders. He’s bringing in his own money-lending tables.”
Figures circulated about Wonga’s interest rates are confusing – from more than 5,000% a year to 30%-35% a month. Wonga itself states its rate is 1% a day.
The Competition Commission, an independent public body set up to ensure healthy competition between businesses in the UK, has been investigating the high-interest loan industry since June.
The Office of Fair Trading, a UK government department aimed at making markets work fairly for customers, had referred the industry to the commission after finding “deep-rooted problems”. It suspected some features of the sector “prevent, restrict or distort competition”.
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