Credit where credit’s due
The Church, the fall of Wonga and the rise of credit unions. David Barclay sees how Christians are putting their money where their faith is
In the summer of 2013 the Church in the UK was front page news for all the right reasons. The Archbishop of Canterbury, Justin Welby, captured headlines with some forceful comments about the practices of payday lenders – “We’re trying to compete you out of existence,” – and his initiative quickly became known as the “War on Wonga”. Three years on, what has happened in this battle for financial justice, and how can local churches of all traditions get involved?
For payday lenders like Wonga, the Church’s intervention must now be remembered as the moment when it all started going wrong. After a huge surge in business following the financial crisis, the Archbishop’s comments crystallised the lenders’ reputation as modern-day usurers trapping vulnerable people in spirals of debt through their astronomical interest rates and aggressive collection tactics. In 2014, the government decided that something had to be done, and bowed to pressure from faith groups and others to introduce a cap on the interest that could be charged and the total amount of debt that an individual could get into through a payday loan. The result has been a sharp decline in both the volume of payday lending and the number of complaints about payday loan debt – a trend that looks likely to accelerate further with the news in May 2016 that Google has decided to ban payday loan adverts from its search engine.
But of course, stopping the supply of high-cost, short-term credit was only ever half of the equation, remembering Justin Welby’s promise to compete with lenders. At a time when one in three British families couldn’t cope with a financial shock of £300 without borrowing, the need for a dynamic community finance sector which can help people to build savings and access affordable credit has never been greater. And here again the Church has begun to get stuck in practically, matching Justin Welby’s tough talk with local action across the country…
This is an extract from the July/August 2016 edition of Reform.