Comments: Church of England and payday lenders

What I really wish is that on the radio this morning they had asked the Archbishop whether he thinks that the organisation that he heads has ethical values that people should invest in.

Posted by Kelvin Holdsworth at Friday, 26 July 2013 at 12:11pm BST

Well, the Archbishop is a (former) businessman, so he should perfectly well understand that Wonga would fight back to save itself. More fun to come, I am sure.

Posted by Charlotte at Friday, 26 July 2013 at 5:01pm BST

This is an intriguing idea. TEC's General Convention voted on doing something similar last year. It isn't up and running yet, to my knowledge, so there's no data at this point.

I know who Jesus felt about the money lenders... However, in the Third World micro loans to women ($200 or so) have been very productive in raising families out of poverty, or at least improving their lot. Small targeted gifts, we made one of $1000 for sewing machines, can make a huge difference. Relatively small amounts of money there can have deep impact.

In our cultures, things are a bit more complicated. But perhaps these loans via credit unions, with reasonable rates, can make a difference. I was shocked when I saw they money lending ads where the APR is 5353 or whatever!!!

It would be great to pair the payday loan with the opportunity for services like education on fiscal matters, job training to move into better jobs, etc.

This is a good move. I know the embarrassment doesn't help, but it sounds like Justin is on the job.

Posted by Cynthia at Friday, 26 July 2013 at 5:16pm BST

Credit unions can only work when people are prepared to advance money to them for onwards lending. It may be that you have been somewhat misled by the quotation that the Church is "putting our money where our mouth is"; the Church does not propose to put any money into credit unions. Instead, the Church is apparently going to ask parishioners to offer any relevant skills gratis, and offer the use of Church premises to credit unions.
In theory, I possess relevant skills since credit unions are chargeable to tax, and prior to my retirement I was an advisor to the then Board of Inland Revenue, specialising in the taxation of financial institutions and financial instruments.
In practise, anyone possessing relevant skills knows perfectly well that what credit unions actually need are people willing to advance money to them.
So, whilst I strive to lend a helping hand where possible, I do not anticipate being called upon; the Archbishop's statement reminded me of the probably apocryphal instruction of the Foreign Office to 'lend all assistance short of actual aid'. Sadly, the people enmeshed with these firms need actual aid...

Posted by Stevie at Friday, 26 July 2013 at 11:10pm BST

Thank Stevie, for better or worse, I'm hoping it works out. I'm hoping that people will advance the money.

Posted by Cynthia at Friday, 26 July 2013 at 11:56pm BST

Archbishop seeks to compete with and undermine payday lender, but then it is revealed that the Church of England itself is heavily invested in the same lender. Haven't I already seen this episode on "Yes, Minister"? Was it "The Skeleton in the Cupboard"? Or was it "The Tangled Web" on "Yes, PM"?

Posted by Charlotte at Saturday, 27 July 2013 at 4:08am BST

I watched Giles Fraser on Newsnight yesterday and he made me realise how complex the morals of this are. The credit unions would still charge an astronomical interest, just less than the several thousands charged by some payday loan companies.

And when he pointed out that the real problem of payday loans was that their business model was based on a 50% default rate, I wondered how church supported credit unions would deal with that. The default rate might be much lower but what would you do with extremely poor people who could not pay their gas bill and therefore resorted to a payday loan?

What would truly ethical lending look like?

Posted by Erika Baker at Saturday, 27 July 2013 at 7:44am BST

This story was covered today in the U.S. also, on National Public Radio:

Posted by JCF at Saturday, 27 July 2013 at 8:22am BST

Stevie, is that right? I have been told that what (some) Credit Unions need is money to pay for adequate admin.

But on the matter of working capital I am sure that some, possibly quite a lot, could be raised even in hard times. But most of us don't know how to offer it.

Posted by american piskie at Saturday, 27 July 2013 at 10:25am BST

All human institutions are morally compromised, especially churches. The question is by how much.

On this issue, I agree with the Archbishop. We have similar problems (if not worse) over here in the USA, including employers who steal employee wages. This embarrassment should not stop the Archbishop from pursuing an urgent social justice issue. I don't know how workable a credit union in the UK would be, but the Church should at least bear witness here.

Posted by FD Blanchard at Saturday, 27 July 2013 at 3:22pm BST

Someone pointed out that the things which sustain the middle classes and keep them surviving if not thriving in hard times is their ability to search for and use knowledge and their educated in skill at deferring gratification.

A unique sales feature of an ethical and enabling church credit union, especially faced with the last chance, pre-programmed default applicant for credit, would be to ask them to deposit not their money but their time in receiving debt and personal financial management counselling. Reports from Citizens Advice staff still indicate a stunning lack of these key life skills.

These skills and the associated time and office facilities are available in many churches, provided by the financially independent and recently retired. At least one per town should be possible, although rural ministry will as usual offer more challenges.

Posted by John Waldsax at Saturday, 27 July 2013 at 4:18pm BST

I think this is a totally noble action of teh Church of England and I salute Justin Welby

Posted by Robert Ian Williams at Saturday, 27 July 2013 at 9:12pm BST

American pixie

My apologies for my delayed reply; I have been in hospital.

Credit Unions are bound by law and, whilst their permitted sources of funding were expanded in the first years of this century, they are still extremely circumscribed. They cannot just take money from whoever offers it; if they do they endanger their recognition as a Credit Union, which in turn would have considerable adverse effects on their taxation liability. In short, they would be faced with the sort of charges which would be likely to bankrupt them.

I am striving not to turn this into a lecture on the taxation of financial institutions, fascinating as that topic is to me; I have noted that not everyone shares my fascination, though I really don't understand why they don't.

The bottom line is that the Archbishop is woefully ignorant about what credit unions are; this is not unusual since not many people know what they are, but he was unwise enough to think that his knowledge of the oil industry meant that he understand financial institutions and could claim that he was going to compete with them.

The oil industry is profoundly different to other businesses; that is why it has a completely different tax regime. It's there to try and constrain an industry which does not see any reason why it should constrain itself.

This is not a good background for someone to emerge from and then believe that he understands how completely different the financial institutions are.

I really do wish that he knew what he's talking about. Unfortunately anyone with skill sets like my own will take one look at it, and, if they are unkind, laugh their heads off. I strive to refrain from laughing because I know that the people seeking loans are frequently desperate.
But the desperate need a great deal more than non-existent competition with Wonga; they need real help. And they are not going to get real help from the Archbishop.

Which is a very great pity; I had hoped he would do so.

Posted by stevie at Wednesday, 14 August 2013 at 2:32am BST
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