Dishing dirt on critics of ultra high-interest lenders

By Savi Hensman
July 26, 2013

High-profile critics of loan company Wonga, which charges extremely high interest rates that can trap poor households in debt, have come under heavy pressure. Yet action is important if those most vulnerable are to be safeguarded.

A competition watchdog is investigating the payday loan industry. Very often the loans are repaid when the borrower next gets their wages or benefit, with a hefty sum in interest. But someone borrowing just £100 from Wonga and making no repayments would owe about £4,200 in a year and nearly £180,000 in 2 years.

There have been embarrassing media revelations about Newcastle United footballer Papiss Cissé and the Church of England, led by Archbishop of Canterbury Justin Welby, after they took a stand.

Muslim, Jewish and early Christian teaching has traditionally warned against lending money at interest, and many people of all faiths and none believe that it is unjust to charge more than moderate sums for lending to those in need. Over two-and-a-half millennia ago, the prophet Ezekiel spoke out against powerful figures who “take both advance interest and accrued interest, and make gain of your neighbours by extortion” (Ezekiel 22.6-12). Many today would echo that.

When Cissé, a Muslim, refused to wear a football shirt bearing the logo of club sponsor Wonga, photographs appeared of him apparently gambling at a casino, and it was suggested that he was being hypocritical. Besides, it was pointed out, he had previously worn the logo of Virgin Money (a very different type of lender) and Islam frowns on breaking contracts. He has reportedly backed down.

Yet having a sense of proportion and prioritising some religious observances over others, or trying to do what is right despite sometimes failing, is different from hypocritically claiming to be better than others.

Welby revealed plans to expand access to credit unions through the church’s presence in local communities, offering an alternative to ultra high-interest lenders. He told the head of Wonga that “we’re trying to compete you out of existence”.

Then it was revealed that, despite the Church of England’s ethical investment policy, a small proportion of its pension fund is invested in Accel Partners, a venture capitalist that helped to fund the launch of Wonga. So the church has an indirect stake in the payday lender.

"It shouldn't happen, it's very embarrassing,” Welby declared when he found out, pledging to act.

Expanding access to medium-interest loans for those on low incomes, including if possible persuading the government to invest in this sector, is important. So is reducing the need for such loans by pushing for a living wage, more affordable housing, adequate social security and an end to the practice of docking people’s benefits using dubious excuses.

Meanwhile those who take a stand against ruthless exploitation of the poor can expect to come under intense scrutiny and be labelled as hypocrites. Perhaps this does not matter so much if those who do the labelling put effort themselves into protecting poor households from being trapped in debt.

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(c) Savitri Hensman is a regular Christian commentator on politics, social justice, welfare and religion. She was written extensively on the theological and religious issues involved in debates about sexuality and marriage equality. She works in the care and equalities sector and is an Ekklesia associate.

Although the views expressed in this article do not necessarily represent the views of Ekklesia, the article may reflect Ekklesia's values. If you use Ekklesia's news briefings please consider making a donation to sponsor Ekklesia's work here.