- Justin Welby has vowed to help grow Britain's 500 financial co-operatives
- He met with Wonga's boss and challenged him over 5,853% APR
- It emerged the CofE pension fund invests in one of Wonga's key backers
- Archbishop said today he was embarrassed by the news
- Has vowed to review investment policy so 'it doesn't happen again
By Gerri Peev and Hugo Gye
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The Archbishop of Canterbury today admitted he was 'embarrassed' to discover that the Church of England had a stake in controversial payday lender Wonga.
The Most Rev Justin Welby has declared war on companies charging inflated rates of interest and vowed to expand credit unions to act as an alternative, in a move backed by the Government.
But yesterday it emerged that the CoE's pension fund invests in one of Wonga's key financial backers - and the Archbishop said today that the Church must 'ensure this doesn't happen again'.
Battle: Archbishop of Canterbury Justin Welby has vowed to put Wonga out of business and even met with the payday lender's founder Errol Damelin (right) to tell him. But tonight it emerged the Church is linked to the firm
The fund, which claims to have an ethical investment policy that bans companies involved in payday lending, has a stake in Accel Partners, a US venture capital firm which raised funds for Wonga in 2009.
When asked on BBC Radio 4's Today programme whether he was 'embarrassed' by the revelation, Mr Welby replied, 'Yes I am', adding: 'I was irritated for a few minutes, but these things happen.'
He vowed that the Church would withdraw its investment from Wonga, saying: 'It shouldn't happen - it's very embarrassing, but these things do happen. We have to find out why and make sure it doesn't happen again.'
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The Archbishop suggested that the CoE would revise rules allowing it to invest in companies which make up to a quarter of their revenues from lending at sky-high rates of interest.
'They shouldn't be invested in Wonga, we don't think it's a good thing,' he said. 'We have to review these levels and make sure that we are consistent between what we're saying and what we're doing.
'We think that the payday lenders charge vastly excessive amounts for the loans they make. This is something that really matters to me.'
Objections: Payday loan company Wonga charges 5,853 per cent annual interest rates on short term loans. To great embarrassment, the CoE?s pension fund admitted it invests in one of Wonga?s key financial backers
However, Mr Welby also insisted that mistakes such as this one are inevitable in world of investing, due to the complicated nature of the financial world.
'We've got to live in the real world, and living in the real world means that life is complicated and you can't escape the complexity,' he said.
Asked if the Church of England was breaking its rules, he replied: 'It's a perfectly valid point. Is a little sin intolerable?
'Sin is a bad thing by definition. Just for the record, I'm not in favour of sin.'
ANALYSIS by JAMES CONEY, MONEY MAIL EDITOR
By launching an attack on payday loan firms the Archbishop of Canterbury has sent a message that they are the scourge of the high street.
He clearly believes the Church could and should offer better help to the most financially in need.
But innovative as his plan is, it will never be the answer to this spiralling debt crisis.
Credit unions are too small, extremely localised and many aren?t well enough financed to cope with the soaring demand from those who want to borrow for just a few days.
They are bound by tight regulations, while many loan firms operate in the Wild West.
Rather, the Archbishop should point a finger of blame at the banks and encourage them to do more. Many are forced into the arms of payday lenders because the cost of short-term borrowing at the banks is so high.
Borrowing ?200 in an unauthorised overdraft for ten days at one major high street bank would cost ?87. That?s an interest rate, known as an APR, of 15million per cent.
With Wonga the same borrowing costs ?26.05 at an APR of 5,853 per cent. Yet few have questioned why banks have been allowed to wash their hands of small borrowers.
It is little wonder those forced to look to less well-known firms found themselves in trouble. Last year 36,413 borrowers contacted debt charity StepChange because they were struggling with payday loans of an average ?1,657. Just 12 months earlier, the number of complaints was half this amount and the size of the debt about a third less.
Thousands of customers have been allowed to take five or more loans and three-quarters of firms fail to check incomes of applicants.
The cowboys are ruining lives and it is going to take a new sheriff and a few good men such as the Archbishop to stop this scourge.
Some have suggested that Church should not be involved with the financial markets at all - the credit unions they are supporting charge annual interest rates of up to 80 per cent, far more than High Street banks.
But the Archbishop said the CoE should 'put our money where our mouth is', adding: 'We don't stand on the sidelines on some sort of great podium lecturing everyone else.'
He continued: 'I don't think capitalism is necessarily amoral - it can sometimes be immoral, but it is not of itself immoral.'
Although much of the debate has focussed on high-profile lenders such as Wonga, Mr Welby said that 'the worst people are not Wonga' and claimed his campaign was targeted more at loan sharks than professionally managed companies.
A Lambeth Palace spokesman said: ?We are grateful to the Financial Times for pointing out this serious inconsistency of which we were unaware.
?We will be asking the assets committee of the Church Commissioners to investigate how this has occurred and to review the holding.?
Ministers have been criticised for failing to cap interest rates, which can top 5,000 per cent a year.
But Chancellor George Osborne said he agreed with much of what the Most Rev Justin Welby is proposing. He told Channel 4 News: ?I also agree that we?ve got to make sure that payday lending and the like is properly regulated, which it hasn?t been before.
?I have huge amount of time and respect for Justin Welby. I personally appointed him to the Banking Commission because of his expertise.?
Lib Dem Business Secretary Vince Cable also backed the Church?s intervention, declaring: ?The Archbishop of Canterbury has hit the nail on the head.?
He told Channel 5 News: ?Credit unions are a better way of providing credit for people on a lower income who are not credit-worthy and can?t use banks.
?We?ve got to have an alternative and the Archbishop is right not just to condemn abuse but to offer alternatives which are more ethical.? The Archbishop wants credit unions to use church buildings across 9,000 communities to expand access to credit unions.
He has called for volunteers who have experience in finance to come forward and help run credit unions to compete with the ?2billion-a-year payday industry. Credit unions are community based not-for-profit organisations offering loans, savings accounts and even mortgages.
Deadlock: Papiss Cisse has refused to wear Newcastle's new strip sponsored by loans company Wonga
They are usually linked to one community or industry, such as the Police Credit Union, and have been regulated by the Financial Services Authority since 2002.
Around one million Britons are members of the nation?s 500 credit unions. Firms such as Wonga have grown in popularity as banks tightened up their lending in the wake of the financial crisis.
In an interview with Total Politics magazine the Archbishop, a former oil executive, said: ?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?.
?We?ve got to have credit unions that are both engaged in their communities and much more professional and the third thing is people have got to know about them. It?s a decade-long process. We?re putting our money where our mouth is, we?re starting a Church of England staff credit union.?
Wonga?s chief executive Errol Damelin said: ?I?m all for better consumer choice. The Archbishop is clearly an exceptional individual and someone who understands the power of innovation.?
He said they discussed banking, financial services and the digital society and had a ?meeting of minds on many big issues?.
The payday loan industry was referred last month to the Competition Commission for an investigation over concerns some lenders were trying to ?distort? competition.
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