Church-backed payday lenders may charge up to 80% interest, admits Archbishop of Canterbury Justin Welby

Archbishop Justin Welby accepted it was ?high? but claimed it was still better than astronomical rates charged by payday lenders who he this week pledged to ?compete out of existence?.

A rate of 80 per cent would see Church-backed lenders charging borrowers four times the amount of some credit cards ? and ten times the amount charged on many bank loans. But on BBC radio the archbishop said: ?We think you can probably do it for an equivalent annual rate of about 70 or 80 per cent. It?s a huge sum of money but it?s better than 5,500 per cent.?

The admission comes after he was already facing embarrassment when it emerged the Church had invested indirectly in payday lender Wonga through its pension fund.

Payday firms offer short-term loans at interest rates which can top 5,000 per cent a year. They have been accused of leading people already in trouble further into debt. The Church has already placed these lenders on a list of unethical investments. And in an interview with Total Politics magazine the archbishop revealed he would be challenging the firms head-on.

He said he had met Wonga chief Errol Damelin and ?bluntly? told him he wanted to put the lender out of business, to which the businessman responded ?I?m all for better consumer choice?. Under the primate?s plan, each parish will now be encouraged to invite a non-profit credit union on to its premises. Congregation members with financial skills would also be encouraged to volunteer at credit unions.

But the archbishop admitted that the challenges of the payday loan market meant competing with private lenders even without making a profit could mean charging an annual rate of between 70 and 80 per cent. He said: ?It would mean a high rate of interest compared to say a normal overdraft, but you have to be in the real world ? 5,500 per cent versus 70 or 80 per cent?? He added: ?It?s better to have a go rather than just to stand and wring your hands and say it?s all terrible.?

A Wonga spokesman said it was unfair to quote an annual rate for? its loans as the most it lent for was a month, and the cost of borrowing ?100 from Wonga for 17 days would be about ?123.

The archbishop?s approach won the backing of London Mayor Boris Johnson who said today: ?I thoroughly congratulate him on his ambition.?

Source: http://www.standard.co.uk/news/uk/churchbacked-payday-lenders-may-charge-up-to-80-interest-admits-archbishop-of-canterbury-justin-welby-8732904.html

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