Church of England admits investment in Wonga fund

Friday 26 July 2013 09.19
Archbishop of Canterbury Justin Welby yesterday pledged to compete payday lenders out of business
Archbishop of Canterbury Justin Welby yesterday pledged to compete payday lenders out of business

The Church of England has confirmed that its pension fund invests in Accel Partners, the US-based venture capital firm that led fundraising in 2009 for Wonga, a payday lender.

The Financial Times reported the investment a day after Archbishop of Canterbury Justin Welby said that the church would seek to drive payday lenders, like Wonga, out of business by launching its own credit unions.

Payday lenders have been criticised for trapping borrowers in a cycle of debt.

"We will be asking the Assets Committee of the Church Commissioners to investigate how this has occurred and to review the holding in this pooled investment vehicle," a spokesperson for Lambeth Palace, the official residence of the archbishop of Canterbury, said in an emailed statement.

"We will also be requesting the Church Commissioners to investigate whether there are any other inconsistencies as normally all investment policies are reviewed by the Ethical Investment Advisory Group."

Rev Welby, who has led the church since March, is among leading critics of firms like Wonga and Provident Financial PFG.L, which typically provide hard-up families with loans of up to £1,000 to be repaid when they receive weekly or monthly wages.

The archbishop said he had met with the chief executive of Wonga, Errol Damelin, and told him, "We're not in the business of trying to legislate you out of existence, we're trying to compete you out of existence", according to an interview in the August issue of Total Politics magazine.

The market for the loans has grown rapidly in Britain and other countries like the United States as benefit cuts squeeze poor households' budgets and traditional bank credit lines withered in the aftermath of the 2008 financial crisis.

Public criticism of the firms in Britain has grown, too, with politicians and poverty-focused charities concerned that the high interest rates the firms charge only dig poor households into more trouble.

Wonga, one the biggest payday lenders in Britain, this month it lifted the annual interest rate on its loans to 5,853%.

Rev Welby, a former oil executive educated at Eton and Cambridge, said the church was "putting our money where our mouth is" in the plan to launch a not-for-profit financial cooperative that offers deposit accounts and low-interest loans.

He said the credit union would be engaged in its community and more professional than lenders like Wonga and other competitors, including QuidQuid and Lending Stream, but conceded that it would be a decade before it flourished, giving few details.

In a statement, Wonga's Damelin called the archbishop an "exceptional individual" and took up Rev Welby's challenge.

"On his ideas for competing with us, Wonga welcomes competition from any quarter that gives the consumer greater choice in effectively managing their financial affairs."

Short-term lenders are coming under more scrutiny globally. The US consumer watchdog said in April that new regulation could be introduced to stop the loans that trap borrowers in a cycle of debt.

Britain's consumer watchdog, the Office of Fair Trading last month vowed to crack down on the £2 billion a year industry and said it was investigating measures like an advertising ban.