Archbishop of Canterbury challenges payday loans companies
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It could soon be a case of God versus Mammon in the British loans market. In recent months, criticism of Wonga and similar payday loans companies has come from several quarters, from politicians to footballers. Now the Archbishop of Canterbury has waded into the argument, promising to campaign to offer ethical alternatives to the exploitative loan companies.
After a conversation with Wonga, Justin Welby has promised to compete the companies out of existence through promotion of credit unions. The Archbishop, a former treasurer in the oil industry who has served on the parliamentary Banking Standards Commission, promoted the development of "credit unions that are both engaged in their communities and are much more professional – and people have got to know about them."
For the desperate, the only recourse to cash is often a payday loans company like Wonga, which charges a standard rate APR of 5,853 percent. In effect this means that somebody borrowing £200 for a month will have to repay £270. It's hardly surprising that they have been compared to loan sharks.
Welby sees credit unions as the solution, although he may be guilty of idealism as these co-operatives cannot match the advertising clout and operating efficiency of Wonga, and have struggled with bad debt liabilities in the past.
Wonga chief executive Errol Damelin could afford to be magnanimous about Welby's initiative. "The archbishop is clearly an exceptional individual and someone who understands the power of innovation," Damelin said. "There is mutual respect, some differing opinions and a meeting of minds on many big issues. 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."
Wonga and other payday loan companies are facing an investigation by the Office of Fair Trading into some of their shadier practices. Opponents hope that the government might offer a more effective curb to their business than a man of God can.