Church of England to develop credit unions network
The Archbishop of Canterbury, Justin Welby, says the network will take a decade to create and will be more professional than firms such as Wonga
The Church of England plans to develop a network of credit unions to challenge payday lending and force the loan company Wonga out of existence, according to Justin Welby, the Archbishop of Canterbury.
In an interview with Total Politics magazine, Welby said the church planned to create "credit unions that are both engaged in their communities and are much more professional".
He said it would be a "decade-long process" and that one key issue was that "people have got to know about them".
He said he had met Errol Damelin, the head of Wonga, one of the largest payday lenders, and told him: "We’re not in the business of trying to legislate you out of existence; we’re trying to compete you out of existence."
Welby launched a Clergy Mutual Credit Union for clergy and church staff in England and Scotland earlier this month.
Credit unions provide savings and loans in their communities and are owned by their users. There are currently 390 credit unions in the UK with outstanding loans of about £605m.
A recent feasibility study by the Department for Work and Pensions found that it would take 10 years to make credit unions "something close to" sustainable.
The report found that credit unions were not working efficiently and were reliant on grants to continue. It said more funding was needed and that a "major programme of holistic change and modernisation" was required.
After a consultation, the DWP last month agreed to increase the maximum monthly interest rate a credit union can charge from 2 per cent to 3 per cent.
A legislative reform order liberalising the rules for credit unions was passed last year, two years after it was originally expected. The changes allow credit unions to grow much larger, allow companies and charities to be members and allow credit unions to pay interest on accounts.
This article was taken from Third Sector – http://www.thirdsector.co.uk/Finance/article/1192866/