THE Church of Scotland is set to team up with the Church of England in its attempt to set up a string of credit unions to tackle payday loans such as Wonga.
Rev Sally Foster-Fulton, convener of the Church of Scotland’s Church and Society Council, told the Herald that the Kirk would work alongside Archbishop Justin Welby in challenging the £2 billion industry.
Ms Foster-Fulton said: “The economics of our society are badly wrong. Payday lenders who levy extortionate charges and rates are exploiting the most vulnerable.
“The Church of Scotland is on the side of the most vulnerable in society because we believe that there is a Gospel bias to the poor.”
Meanwhile Wonga has fought back by firing out a string of adverts today containing 10 “commitments” to help customers.
The lender said it has wrongly been tarnished in some quarters as an “unacceptable business” that preys on the vulnerable after the Most Rev Justin Welby told Wonga that the Church of England wants to “compete” it out of existence as part of plans to expand credit unions.
Among the commitments in its advertising drive, Wonga says it does not extend loans more than three times, it carries out “thorough” credit checks for every loan and it freezes interest rates to prevent costs from spiralling.
In a statement placed on the OpenWonga website, it said it welcomes competition and agreed with much of what was said by the Archbishop in the meeting, which was also attended by Errol Damelin, chief executive of Wonga.
But it continued: “His comment that he wants to ‘compete Wonga out of existence’ has been interpreted by some as meaning we are an unacceptable business. Some have taken it a step further, saying we make unaffordable loans to the most vulnerable in society. We respectfully disagree.”
The adverts of varying sizes appeared in national newspapers today, having been booked yesterday as Wonga’s contribution to the debate. They say the lender is “part of the changing financial landscape in Britain” and credit unions also have an important role to play.
Wonga, which has more than one million active customers, also pledges always to help those in financial difficulty and show people the full cost of the loan up front in all cases.
The firm said it has “responsibly” lent more than £2 billion over the last six years, despite turning down three-quarters of all first loan applications.
Wonga’s default rate - money that it does not get back - is around 7%, which it said is comparable with other forms of short-term borrowing such as credit cards.
It said the 10 commitments underpin its business model and it is publishing them so that people can make up their own minds about what type of organisation it is.
Wonga’s ‘Ten Commitments’
1. We always show you the cost of a loan before you apply;
2. We thoroughly credit check you for every loan;
3. We let you control the size and length of your loan, to the pound and to the day;
4. We don’t charge thousands of per cent interest. Ever;
5. We let you repay early at no extra cost;
6. We freeze interest at no more than 60 days after the due date, so costs can’t spiral;
7. We don’t let you extend your loan more than three times;
8. We always help customers in financial difficulty;
9. We will continue to innovate and create new products;
10. We always welcome competition.