Church leads bid to buy Wonga loans to help poor
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.”