Payday Loans and the Church

In between ‘that’ baby and the tragic events in Spain this week, another story has been brewing that once again exemplifies the Church of England’s tendency to reach into areas of life that it really should leave well alone.

The new Archbishop of Canterbury may be gearing up to christen the new prince, but the week of the royal birth is one that Justin Welby will probably want to forget.

“We’re not trying to legislate you out of existence; we’re trying to compete you out of existence” was the excruciating message delivered to the boss of one commercially savvy organisation by the head of one that is rather less so; to complete the irony, the revelation was made in that other great meeting place of religious minds – Total Politics magazine.

Archbishop Welby believes that by expanding credit unions, he can help steer many thousands of people back onto the straight and narrow when it comes to their personal financial affairs, and in doing so bring down a business that was turning over 9-figure sums long before it was brought into the public spotlight.

The Church appears to believe that the only reason that Wonga is able to thrive is because the market is not sufficiently competitive; were there to be more options (yes, even more options) available to those needing to borrow, the fundamental business model of payday lending would no longer be viable. They thus appear oblivious to the idea of supply and demand.

Do businesses like Wonga get a bad press? Yes. Do they deserve it? Maybe. Do people ignore the fact that – as with so many of the perils that society’s spokesmen get high and mighty about – the single biggest factor that maintains them is our own tendency to feed them? Absolutely.

While the moralist would bemoan the cynicism of Wonga’s heavy marketing at a time of high unemployment and low wage growth, the rationalist would praise its business sense.

True, the equivalent annual percentage rates on these loans would make even the most hard-headed economist baulk – and the average headline writer salivate – but then payday loans are not intended to last for anything like that long.

That as many as 1 in 10 recipients do end up saddled with spiralling debts, as one missed repayment is compounded by another, is not the fault of the company offering the service.

If used prudently, a short-term loan can help an individual avoid missing repayments on far less forgiving loans. If the Sage had the option to avert the risk of a visit from the bailiffs, he is fairly sure ethical concerns – even if he believed them – would be low on the list of priorities.

But whatever the rights and wrongs of Archbishop Welby’s point of view – one he has not hesitated to express since the early days of his tenure – his misery was complete when, within hours, it turned out that his own Church had invested tens of thousands of pounds in a fund that had bought into the very company he wanted to destroy.

To a long-term sceptic of the Church and its many misplaced social missions, such a rapid and devastating fall from grace offers a certain sense of satisfaction. For the fledgling Archbishop, it’s hugely embarrassing and humbling.

Yet he is now committed to this project to cure the world of nasty money men, hence his attempts to modify his message – tolerating the world’s ills whilst retaining his resistance to them. The Church is an expert at lame stances, but this one’s right up there.

Perhaps the Archbishop should stick to the day job – christenings and all.