Archbishop of Canterbury ’embarrassed’ by Wonga link

The Church of England called for an investigation into its own pension fund after it emerged it had links to Wonga – the payday lender the Archbishop of Canterbury said he wants to take on.

The Financial Times said the fund, which claims to have a strong ethical investment policy that explicitly bans companies involved in payday lending, has invested in Accel Partners, the US venture capital firm that led Wonga’s 2009 fundraising.

It comes after The Most Rev Justin Welby said the Church of England wants to “compete” Wonga out of existence as part of its plans to expand credit unions as an alternative to payday lenders.

Speaking on BBC Radio 4 Today’s programme the archbishop said he was embarrassed on a scale of “eight” out of ten.

He said: “I was irritated for a few minutes but, you know, these things happen. I understand the business, it’s an incredibly complex business.

“It shouldn’t happen, it’s very embarrassing, but these things do happen. We have to find out why and make sure it doesn’t happen again.”

Wonga

Speaking about payday lender Wonga the archbishop appeared to distance himself from suggestions that he wanted to take the firm on.

He said: “Funnily enough, I never took on Wonga in particular. The context was talking about the entire payday lender movement. Wonga is actually a very professionally managed company. Errol Damelin, the chief executive, is a very clever man, runs it extremely well.”

He insisted, however, that he was not backtracking from his commitment to clamp down on the industry.

“We need to provide a proper alternative to these very, very costly forms of finance. The worst people are not Wonga. There are plenty of others much worse.”

Mr Welby said it was the media that had singled Wonga out from a wider point he wanted to make about payday lenders.

He added: “I didn’t pick on Wonga – it’s the press that picked on Wonga more than I did,” he added.

In a conversation with Mr Damelin, he said, the chief executive had said: “It would drive people into the hands of the loan sharks” – “which I entirely agree with”, said the archbishop.

“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,” he said.

Speaking about how much the church is allowed to invest in other businesses, Mr Welby said: “We’re allowed to invest in a company where less than 25% of its business is in this area.”

Although he said this figure was too high, he suggested his ability to change the church’s investment practice was beyond his power.

He said: “My own view is that that is probably too high a level. It is an ethical investment advisory group, I don’t have authority to tell them what to do.”

Clamp down

The archbishop has been keen to clamp down on short-term loan firms, which are often characterised by high interest rates and swift approval times, by setting up a credit union for the clergy.

He was backed yesterday by Business Secretary Vince Cable, who said the government was looking at better regulation of the industry as well as a bar on advertising high interest loans to people who can ill-afford to pay them back.

But the FT said the pension fund investment – despite being only a few million pounds, according to its source – threatened to undermine the archbishop’s pledges to take on the payday lenders.

The archbishop, who has served on the parliamentary Banking Standards Commission, has said he plans to expand the reach of credit unions as part of a long-term campaign to boost competition in the banking sector.

There are also plans to encourage church members with relevant skills to volunteer at credit unions. Small, local lenders could also be invited to use church buildings and other community locations with the help of church members.

The government announced an investment of £38 million in credit unions in April to help them offer an alternative option to payday lenders.

The entire pay day lending industry, worth £2 billion, was referred last month for a full-blown investigation by the Competition Commission after the trading watchdog uncovered “deep-rooted” problems with the industry.

The Office of Fair Trading (OFT) said it decided to make the referral because it continues to suspect that features of the market “prevent, restrict or distort competition”.

Responsible lending

Wonga said in March that it welcomed any attempt to encourage responsible lending and that it has been “instrumental” in helping to raise industry standards.

Mr Damelin, the founder of Wonga, who met Mr Welby recently, said: “The archbishop is clearly an exceptional individual and someone who understands the power of innovation.

“We discussed the future of banking and financial services, as well as our emerging digital society.

“There is mutual respect, some differing opinions and a meeting of minds on many big issues.

“On the competition point, we always welcome fresh approaches that give people a fuller set of alternatives to solve their financial challenges. I’m all for better consumer choice.”