Wonga: Archbishop Aims To End Payday Lenders
Wonga boss Errol Damelin insists he welcomes
competition from the Church of England's plans to expand credit unions.
4:02pm
UK, Thursday 25 July 2013
The payday lending industry is currently under scrutiny
 |
| Archbishop Justin Welby |
 |
| Church of England |
The Most
Rev Justin Welby wants to force it out of business by expanding the Church of
England's credit union plans.
Mr Welby
said he had delivered the message to Errol Damelin, chief executive of Wonga,
one of Britain's best-known payday lenders, during a "very good
conversation".
"I've
met the head of Wonga and we had a very good conversation and 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'," he told Total
Politics magazine.
"He's
a businessman, he took that well."
 |
| Errol Damelin -Wonga founder |
The
Archbishop's remarks come after he launched a new credit union for clergy and
church staff earlier this month at the General Synod in York.
Mr Welby,
who has served on the parliamentary Banking Standards Commission, has said he
plans to expand the reach of credit unions as part of a long-term campaign to
boost competition in the banking sector.
There are
also plans to encourage church members with relevant skills to volunteer at
credit unions.
The
Government announced an investment of £38m in credit unions in April to help
them offer an alternative option to payday lenders.
The
entire payday lending industry, worth £2bn, was referred last month for a
full-blown investigation by the Competition Commission after the trading
watchdog uncovered "deep-rooted" problems with the industry.
Wonga
said in March that it welcomed any attempt to encourage responsible lending and
that it had been "instrumental" in helping to raise industry
standards.
Mr
Damelin said: "The Archbishop is clearly an exceptional individual and
someone who understands the power of innovation.
"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."
Welby Defends Wonga After
Church Link Emerges
http://news.sky.com/story/1120531/welby-defends-wonga-after-church-link-emerges
The Archbishop of Canterbury heaps praise on the
payday lender after an embarrassing funding link with the Church is revealed.
 |
Justin Welby: 'It's very embarrassing'
|
The Archbishop of Canterbury has insisted he was not picking on Wonga
after it emerged the Church of England invests in the payday loan firm.
The Most
Reverend Justin Welby admitted being "irritated" and "embarrassed"
by the revelation but went on to heap praise on Wonga and its management.
Mr Welby
hailed the company for its professionalism and suggested it was far from the
worst organisation in the loan sector.
The link
between the Church and the firm emerged hours after
the Archbishop said he wanted to force Wonga out of business by expanding
credit unions.
The
Financial Times found the Church's pension fund had put money into Accel
Partners, a US venture capital firm that led Wonga's 2009 fund-raising efforts.
Until the
report emerged, Mr Welby had no idea about the connection.
Sources
suggested he was "furious" but on Friday, in a lengthy interview, he
merely said: "I was irritated for a few minutes but, you know, these
things happen."
Justin Welby: 'It's very embarrassing'
He did
admit the affair was "very embarrassing" and vowed to investigate,
signalling there could be a review of the Church's entire investment portfolio.
But he
said: "I never took on Wonga in particular. The context was talking about
the entire payday lender movement.
"Wonga
is actually a very professionally managed company. Errol Damelin, the chief
executive is a very clever man, [who] runs it extremely well."
Despite
praising the company, he said he was still unhappy about the Church's
investment.
"They
shouldn't be investing in Wonga. We don't think that's a good thing," he
told the BBC's Radio 4 Today programme.
And he
insisted he was not backtracking on his commitment to clamp down on the
industry, which is currently the subject of a Competition Commission probe.
"We
need to provide a proper alternative to these very, very costly forms of
finance. The worst people are not Wonga. There are plenty of others much
worse," he said.
Mr Welby
said Church policy allows investments in a company where 25% of its business is
in the loan area, indicating the arrangement with Wonga may be against its
rules.
"I
think we have to review these levels and make sure we are consistent between
what we're saying and what we're doing," he said.
The Archbishop conceded that it was almost impossible for the
Church to make an investment that was not somehow tainted.
He said:
"If you exclude any contact with anything that directly or indirectly gets
in any way bad, you can't do anything at all."
Lambeth
Palace has said it will ask the Assets Committee of the Church Commissioners to
investigate the link to Wonga and review the holding.
It added:
"We will also be requesting the Church Commissioners to investigate
whether there are any other inconsistencies as normally all investment policies
are reviewed by the Ethical Investment Advisory Group (EIAG)."
Mr Welby
is seeking to expand the reach of credit unions as part of a long-term campaign
to boost competition in the banking sector and clamp down on short-term loan
firms.
The
Government announced an investment of £38m in credit unions in April to help
them offer an alternative option to payday lenders.
The Office
of Fair Trading referred the entire payday lending industry,
which is worth £2bn, to the Competition Commission last month after finding
"deep-rooted" problems.
It said
it decided to make the referral because it continues to suspect that features
of the market "prevent, restrict or distort competition".
Wonga
said in March that it welcomed any attempt to encourage responsible lending and
that it has been "instrumental" in helping to raise industry
standards.
Mr
Damelin, its founder, said: "The Archbishop is clearly an exceptional
individual and someone who understands the power of innovation.
"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."
The
company has launched a new advertising campaign setting out "ten
commitments" about its lending practices in an apparent tongue-in-cheek
reaction to the Archbishop's original remarks.
-
Church Of England Backs
£1bn RBS Branches Bid
The Church's involvement in offer for branches will
involve multimillion pound investment from £5.5bn fund, Sky News learns.
By Mark Kleinman, City EditorThe
Church of England’s endowment fund is backing a bid for more than 300 Royal
Bank of Scotland (RBS) branches amid intense pressure on the banking industry
to reorient its moral compass.
Sky News
can exclusively reveal that the Church of England Commissioners, who manage
£5.5bn of investments, have agreed to plough the money into a consortium being
led by Lord Davies, the former trade minister.
The
development comes a week after a parliamentary commission whose members
included the Archbishop of Canterbury, Justin Welby, published a wide-ranging
group of recommendations aimed at reforming the City’s ethics and governance.
The size
of the Church Commissioners’ investment in the consortium attempting to buy a
substantial stake in the 316 RBS branches is unclear, although it is expected
to be measured in the millions of pounds.
The other
members of the bidding group are Corsair Capital, a private equity firm where
Lord Davies is a partner; Centerbridge, an American investment firm; RIT
Capital, a vehicle headed by Lord Rothschild; and Standard Life, the insurance
and pensions group.
The
consortium wants to buy a major stake in the network ahead of an initial public
offering on the stock market.
Insiders
believe the Church Commissioners’ involvement will enhance the consortium’s
appeal to the board of RBS and the Treasury, which is likely to play an
important role in deciding the outcome of the £1bn auction.
The
Corsair bid is vying with another offer comprising around two dozen big City
institutions such as Foreign & Colonial, Schroders and Threadneedle
Investments. A third bid involving Blackstone and AnaCap, two private equity
firms, is still in the frame but is thought to have only an outside chance of
buying the branches.
All of
the bidders are now conducting due diligence on the branch network, with a
decision expected in the coming weeks about a preferred buyer. RBS may decide
to float the business on the stock market in the conventional way, or it could
do so in conjunction with the sale of a minority stake.
The
branches auction was triggered by Santander UK’s withdrawal from a deal last
year to buy the network, citing IT challenges.
RBS was
ordered to offload the network, which has a roughly 5% share of the UK business
banking market, by the European Commission in 2009 in return for the £45.5bn of
state aid required to rescue the bank.
It is not
unprecedented for the Church Commissioners to invest in a corporate bid of this
kind, although it is thought to be the first time that they have sanctioned
participation in a consortium bid for British banking assets.
The
church fund holds a wide range of equities, property and other assets, but does
not invest in industries such as tobacco or payday lending.
The Commissioners’
fund aims to generate an annual return of RPI plus 5%. According to its annual
report the private equity part of its portfolio, which invests in unlisted
companies, achieved a return of 2.9%, while it made new private equity
commitments during the year of almost £25m.
The
Church Commissioners also hold shares in Barclays, and said in the recent
annual report of their Ethical Investment Advisory Group that the bank’s
involvement in the industry-wide Libor-rigging scandal demonstrated that it had
“lost sight of its fundamental role in society and its wider obligations”.
“We have
engaged intensively with Barclays since last June, including at Board level. We
have been encouraged by the determination of the bank’s new leadership to turn
a corner and to foster a more ethical culture,” it said.
“However,
ethical conduct cannot simply be enforced. We will know that Barclays has truly
transformed when it inspires its staff to make sustainable profits through
serving its customers and fulfilling its fundamental role in society.”
Last
week, Antony Jenkins, the chief executive who replaced Bob Diamond in the wake
of the Libor debacle, joined the Archbishop of Canterbury at a City debate
about banking ethics.
“In the
last 10 years, banks adopted remuneration policies that meant that a relatively
small number of employees took such a large part of the overall revenues as to
make it impossible for the widest number to benefit – or for there to be
adequate capital, in some cases, for the enterprise to remain self-sustaining,”
said Dr Welby.
Many of
the recommendations of the Parliamentary Commission on Banking Standards,
including deferring bankers’ pay for 10 years and cancelling their pensions in
the event that their institution requires taxpayer support, are designed to
restore public trust in the industry.
The
Treasury will issue its detailed response to the report next month.
In a
speech at Mansion House last week, George Osborne, the Chancellor, said there
was a case for examining whether the sale of the RBS branch network, which has
the code-name Project Rainbow, and a larger set of assets by Lloyds Banking
Group would go far enough to enhancing competition in British banking.
A
spokesman for the Church Commissioners declined to comment on the fund’s
involvement in the RBS bid.
The payday lender's advert will attempt to soften
its image following remarks by the head of the Church of England.
The
payday lending group Wonga will on Friday attempt to begin changing public
perceptions of its business model following a vow by the Archbishop of
Canterbury to "compete it out of existence".
Sky News
has seen a copy of an advertisement that Wonga will place in a number of
national newspapers, in which the company will set out 'ten commitments' about
its lending practices.
 |
| The Ten Commitments |
Among the
pledges to be made by the payday lender are that it welcomes competition, would
"always help customers in financial difficulty" and that it would
never charge interest at an annual percentage rate running into the thousands.
The
description of Wonga's manifesto as its 'ten commitments' is understood to be a
tongue-in-cheek riposte to the Archbishop but follows a bruising period for
Wonga and the wider industry.
Last
month, the sector was referred to the Competition Commission amid political
anger about the activities of some short-term lenders.
The row
was stoked on Thursday when comments made by Justin Welby, the Archbishop of
Canterbury, were published in the magazine Total Politics.
Referring
to a meeting that he had held with Errol Damelin, the chief executive of Wonga,
several weeks ago, Dr Welby said:
"We
had a very good conversation and 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'. He's a businessman, he took that well."
The
Archbishop was referring to the emerging credit union movement, a form of
financial co-operative which lends money at comparatively low rates.
However,
the Church of England faced being embarrassed by the debate on Thursday night
when it emerged that its pension fund was an investor in one of the funds that
helped to establish Wonga in the UK.
Wonga has
sought to counter mounting criticism by pointing out that it only lends money
to consumers who have been subjected to credit-checks, and that customers can
repay loans early with no additional charge.
In
remarks to be published on its website on Friday, Wonga is expected to say:
"Since 2007 Wonga has responsibly lent over £2bn and we now have over a
million customers.
"We've
done that despite declining three quarters of all first loan applications and
ensuring a principal default rate (money lent that we don’t get back) of around
7%. This is comparable to other forms of short-term credit, such as credit
cards.
"We
work hard to lend only to the people who can pay us back, and our mainstream
services for individuals and businesses are now available across three
continents."
Wonga has
also been caught up in a row over the refusal of Papiss Cisse, the Newcastle
United striker and practising Muslim, to wear a shirt bearing the name of the
payday lender, which is the club's sponsor. He has now agreed to do so,
Newcastle announced on Thursday.
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MORAL LESSON:
1.
Regardless of who you are and whatever the circumstances facts must be thoroughly checked to avoid big embarrassment!
2,
Having discovered that you have made a mistake, based on the information available to you at the time, you must be humble and loyal to your God and your conscience and admit you were wrong ( PUTUP YOUR HAND AND SAY - SORRY!)
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