During the recession, an influx of payday lenders hit the high street with a vengeance. Families struggling to pay the bills often had no choice but to take out short-term loans with high interest rates, with the result that chains such as Wonga and Quick Quid became common features in town centres across the country.
While this may have been positive news given record high street vacancy rates, the fact that borrowers often fall into more debt due astonishing interest rates caused the Office for Fair Trading to step in.
Now, the Church of England has joined the debate, with the Archbishop of Canterbury, the Most Rev Justin Welby, warning Wonga boss Errol Damelin that his aim is to put credit lenders out of business.
Archbishop Welby has announced plans to expand credit unions in a bid to give hard-up consumers an alternative to taking out payday loans. Already, a new credit union has been launched which charges low rates of interest for clergy and church staff seeking short term loans.
However, the popular consensus is that this type of scheme could be expanded to benefit communities at large. Rather than the church running these credit unions, it would simply provide financial backing and allow them to operate on church grounds, thus hopefully providing competition to payday loan firms which have managed to monopolise the market for some time.
The Archbishop spoke of his meeting with Mr Damelin, saying; “I’ve met with the head of Wonga and we had a very good conversation.
“I said to him quite bluntly that ‘we’re not in the business of trying to legislate you out of business; we’re trying to compete you out of existence.’
“He’s a businessman; he took that well.”
The church plans to approach around 500 independent loan companies and offer their assistance in increasing their business turnover. In return, the companies will lower their interest rates so consumers have access to manageable short term loans – therefore reducing the chance of consumers entering into further debt.
Archbishop Welby’s proposals have already gained the support of the Association of British Credit Unions, which believes that the support of church congregations will help credit unions become a force to be reckoned with for more mainstream credit lenders.
In a statement, it said; “Credit unions have been shown to be best value in the UK market up to about £2,000, and many will match bank rates for higher value loans as well.
“They lend responsibly and ensure repayment terms are affordable for the borrower.”
Across the UK, many churches already have available spaces which are being used as libraries, shops and post offices. In that context, the leap to financial advice provision is not that great, especially as organisations such as Christians Against Poverty already utilise church buildings to offer debt counselling.
However, should this move force payday lenders to reconsider their rapid expansion into high streets across the country, the issue of vacancy rates could become even more of a problem than they currently are. With one in eight shops lying empty as of April this year, any loss of tenancy is bad news for Britain’s town centres.
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