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Church plans to 'compete' Wonga out of business Church plans to 'compete' Wonga out of business
(about 5 hours later)
The Archbishop of Canterbury has warned the online lender Wonga that the Church of England plans to force it out of business - by competing against it.The Archbishop of Canterbury has warned the online lender Wonga that the Church of England plans to force it out of business - by competing against it.
In an interview with Total Politics magazine, the Most Reverend Justin Welby said he had a "good conversation" with Wonga chief Errol Damelin. The Most Reverend Justin Welby told Total Politics magazine he had met the payday loan firm's boss, Errol Damelin, and had a "good conversation" with him.
The archbishop has criticised such companies for what he calls excessive rates of interest.The archbishop has criticised such companies for what he calls excessive rates of interest.
He said the Church could help non-profit lenders do more. Mr Damelin said he was "all for better consumer choice".
It has already set up a non-profit credit union for clergy and staff. 'Took it well'
"I've met the head of Wonga, and we had a very good conversation," the Archbishop told the magazine. Payday firms offer short-term loans, often at high interest rates, and have been accused of leading people into more debt.
"I said to him quite bluntly 'we're not in the business of trying to legislate you out of existence; we're trying to compete you out of existence'." Archbishop Welby, a former financier who sits on the Parliamentary Commission on Banking Standards, has previously lobbied for a cap on high interest rates charged by loan companies.
In the interview, the archbishop said the Church could help non-profit lenders do more to compete with payday firms.
"I've met the head of Wonga, and we had a very good conversation," the archbishop told the magazine.
"I said to him quite bluntly that 'we're not in the business of trying to legislate you out of existence; we're trying to compete you out of existence'."
He said of Mr Damelin's response: "He's a businessman; he took that well."
Mr Damelin later said: "There is mutual respect, some differing opinions and a meeting of minds on many big issues.
"On the competition point, 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."
New unionsNew unions
Archbishop Welby has said he plans to expand the reach of credit unions. Archbishop Welby also said he planned to expand the reach of credit unions. Earlier this month, he launched a new credit union aimed at clergy and church staff.
Earlier this month he launched a new credit union aimed at clergy and church staff.
Credit unions charge their members low rates of interest to borrow money.Credit unions charge their members low rates of interest to borrow money.
Wonga has said it charges around 1% a day on its consumer loans, which are short-term, and for small amounts. BBC religious affairs correspondent Robert Pigott said the archbishop's plan was to go to some of the 500 independent loan companies who lend to Church members and say to them, "We will help you by letting you have access to our buildings and expertise".
In April 2013 the government announced an investment of £38m in credit unions, to help them offer an alternative to pay-day lenders. Our correspondent said the Church would not run the companies but would help them and allow them to work on its premises.
"I think the archbishop would see this as a social good countering a social evil," he said.
He also said it was quite possible that in future people could go to church when they needed to borrow money.
"Churches are already being used as libraries and shops and post offices. It's part of a wider trend for churches to try and become more relevant to people's everyday lives."
'Irresponsible lending'
In April the government announced an investment of £38m in credit unions, to help them offer an alternative to pay-day lenders.
Wonga has said it charges about 1% a day on its consumer loans, which are short term, and for small amounts.
An investigation into the payday loan industry by its regulator found widespread irresponsible lending earlier this year.
The industry, worth £2bn, was later referred to the Competition Commission by the Office of Fair Trading.
At an industry summit in Whitehall last month lenders were told they could face tighter controls, including limits on the number of loans that can be taken out and a cap on the total cost of credit.
The measures will be considered by the Financial Conduct Authority, which formally takes over regulation of the industry from next April.