Church leads bid to buy Wonga loans to help poor

The Guardian - - FRONT PAGE - Robert Booth So­cial af­fairs correspondent

The arch­bishop of Can­ter­bury is set to lead a not-for-profit res­cue ef­fort for the £400m Wonga loan book af­ter the pay­day lender col­lapsed last month un­der a wel­ter of com­pen­sa­tion claims, the Guardian can re­veal.

Justin Welby will con­vene in­vestors and char­i­ta­ble foun­da­tions at Lam­beth Palace next week to ex­plore a bid for the loans in an ef­fort to pro­tect some 200,000 bor­row­ers who could oth­er­wise be forced to pay back their debts at high rates by a com­mer­cial lender. A pro­posal that the Church of Eng­land should buy the loan book us­ing its £7bn in as­sets was made this week by Frank Field, the chair­man of the Com­mons work and pen­sions com­mit­tee. He has asked Wonga’s ad­min­is­tra­tors, Grant Thorn­ton, to de­lay mak­ing any deal with pri­vate com­pa­nies cir­cling the as­sets while the church con­sid­ers what it can do.

Field said Welby “showed en­thu­si­asm” for the idea and for­warded his pro­posal to the Church Com­mis­sion­ers, ask­ing them to act if pos­si­ble.

The MP said other or­gan­i­sa­tions were in­ter­ested in join­ing the con­sor­tium. He be­lieves that af­ter the Wonga debts are han­dled, it could de­velop into a low-cost pay­day lender – a peo­ple’s bank charg­ing nom­i­nal in­ter­est rates for short-term loans that could be paid back di­rectly from ben­e­fits cheques, re­duc­ing the risk for back­ers.

The ad­min­is­tra­tors now in charge of Wonga said they would con­sider all pro­pos­als. Un­der the In­sol­vency Act, their role is to re­alise the as­sets and dis­trib­ute them for cred­i­tors.

Af­ter con­sid­er­a­tion by the Church Com­mis­sion­ers, it seemed likely that the church would not in­vest its own as­sets but would in­stead try to cre­ate a res­cue con­sor­tium.

At one point Wonga cus­tomers faced in­ter­est rates as high as 5,853% a year, be­fore they were capped in 2015. They now stand at about 1,500%.

Welby has re­peat­edly clashed with Wonga and in

2013, the arch­bishop told the com­pany’s chief ex­ec­u­tive that he wanted to put it out of busi­ness by sup­port­ing ri­val com­mu­nity-lend­ing schemes.

“I said to the chief ex­ec­u­tive of Wonga that I wanted credit unions to com­pete him out of busi­ness,” he told the TUC con­fer­ence this week. “Well, he’s gone!”

The 2013 at­tack mis­fired when it emerged that the church had in­di­rectly staked about £75,000 in Wonga through an in­vest­ment fund.

The moves are the lat­est sign of the arch­bishop’s ac­tivist ap­proach to his lead­er­ship of the Angli­can com­mu­nion. This week he vil­i­fied the on­line re­tailer Ama­zon, which he ac­cused of “leech­ing off the tax­payer”. He com­plained: “They don’t pay a real liv­ing wage, so the tax­payer must sup­port their work­ers with ben­e­fits.”

Ama­zon is one of the church’s 20 largest in­vest­ments but it said it would not sell the shares be­cause it was “most ef­fec­tive to be in the room with these com­pa­nies seek­ing change as a share­holder”.

The church ap­pears to be tread­ing care­fully on Wonga. Sources fa­mil­iar with dis­cus­sions said con­cerns about the rep­u­ta­tional im­pact of the church de­cid­ing which loans to write off and which to en­force mean that while it re­mains pos­si­ble it would use its own money, it is more likely to spear­head other in­vestors and char­i­ta­ble foun­da­tions to mount the res­cue. There is also con­cern that the church’s as­sets are con­fig­ured as a phil­an­thropic fund but are re­quired to sup­port church ac­tiv­i­ties. Its funds are com­pet­i­tively man­aged by the Church Com­mis­sion­ers and it made an in­dexbeat­ing 17% re­turn in 2016.

Field said that re­gard­less of whether the church used its own money, he hoped any Welby-led con­sor­tium would pass on to bor­row­ers the dis­count rate at which they bought loans.

“Nor­mally this would be sold to loan sharks, who would try and reclaim 100% of the debt rather than the, say, 12p in the pound they paid,” said Field.

A Lam­beth Palace spokesman said: “We are re­flect­ing on the let­ter from Frank Field to help de­ter­mine what may or may not be pos­si­ble in the months ahead re­gard­ing the reper­cus­sions fol­low­ing Wonga’s col­lapse.”

A spokesman for Grant Thorn­ton said: “The ad­min­is­tra­tors are more than will­ing to con­sider all such in­ter­est in ac­cor­dance with their statu­tory obli­ga­tions, while work­ing closely with the Fi­nan­cial Con­duct Au­thor­ity to con­duct an or­derly wind-down.”

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