Five years ago the archbishop of Canterbury declared 'War on Wonga'. Taking on Britain's largest payday company was part and parcel of the Archbishop's wider efforts to tackle harmful high-cost lending and promote fair and affordable finance, particularly to those whom the financial system excludes or harms.
At its peak, the total amount lent by payday companies was around £3.7bn in 2012, with a large number of loans usually given to the financially vulnerable, struggling to make ends meet. To many, what looked like a lifeline turned out to be an ever-tightening noose, with interest rates climbing as high as 5,853% APR (Annual Percentage Rate).
Five years on, the 'War on Wonga' continues and it still matters. It matters because at stake is nothing less than the flourishing of people made in God's image, and the health of communities. Debt is not an 'economic issue' (whatever that is) but a deeply moral one. It's not primarily about numbers and balance sheets, but about relationships, people embedded in communities, with responsibilities, vulnerabilities and needs. The challenge, then and now, is to create a common life in which credit does not crush people but contributes to the common good, where debt strengthens rather than splinters communities.
The archbishop called the sky-high interest rates of payday lenders 'sinful'. However, he made it clear the Church was not in the business of regulating payday companies like Wonga out of existence, but was ready to outcompete them through fairer and more responsible alternatives.
The positive vision was to spark the Church's imagination for fostering an alternative economic life. A common life based on mutual commitment and generosity that would serve all, particularly the financially disadvantaged and vulnerable. Practically, it was to invite credit unions to church – to use the network of churches in the country to set up credit unions, community-based collectives that offer savings accounts and short-term loans that would boost competition for short term credit and provide a moral and relationships-focused alternative to the detrimental practices of mainstream payday lenders.
Significant progress has been made since 2013. Of the many initiatives that came out of the archbishop's prophetic challenge was the Church Credit Champions Network set up by the Centre for Theology and Community (later developed into the Just Finance Foundation). The network was established to support churches seeking to work with credit unions and provide fair and affordable credit, drawing on the unique logistical and relational resources of the church.
In 2015 Parliament passed legislation which cracked down on payday lenders and instituted an interest rate cap at 0.8 per cent (per day) of the amount borrowed, with default charges set not to exceed £15. This was achieved partly as a result of the church's campaigning efforts on the issue. The effects of the cap have been extremely positive. According to the Financial Conduct Authority, an estimated 760,000 borrowers are saving a total of £150 million per year because of the cap. There is no evidence that the use of illegal loan sharks has increased, as some feared, and the number of loans made by payday companies has dropped from 6.3m in the first half of 2013 to just 1.8m in the first half of 2015.
Walking the talk, the Church of England set up its own credit union for clergy, church workers, and teachers across its denominations. The Churches' Mutual Credit Union (CMCU) has now well over 600 members and assets worth £3 million.
The Church also launched the LifeSavers programme, a primary school financial education programme that has now been rolled out in over 100 schools across the country. The programme combines values-based financial education in the classroom and a parental engagement programme with the pupils themselves running schools-based savings club for children, in partnership with their local credit union. LifeSavers recently celebrated its second year of operation and so far over 17,000 children have received financial education in their schools. Nearly £55,000 has been saved in school savings clubs.
In the diocese of London alone 139 churches (1 in 3) took some action in response – both running workshops in churches talking about money, and also practical and financial support for their local credit union.
But the job is not done. Household debt continues to rise, particularly 'priority debt' such as council tax, water, energy, and rent arrears. This is driven not by reckless overconsumption but mainly by low wages, mental health problems, and relational breakdown. In London, the most financially vulnerable today are found in private rented accommodation, live in in the outer boroughs, and are in work. Poverty is moving to the outskirts of the city and is linked to unstable housing and insecure employment with low wages.
The 'War on Wonga' is therefore far from over, even if important battles have been won. But in this war there is no silver bullet. Regulation has a crucial role to play – the cap on interest rates in 2015 was a significant milestone – as do credit unions – there should be more and they should be stronger.
The church must continue to speak out prophetically against unjust and harmful economic practices. But perhaps the church's greatest contribution to society is to change the culture by modelling an alternative economic life: practising generosity and commitment to place and people, strengthening relationships of gift exchange and mutuality, building an economic life on our shared humanity – broken and redeemed in Christ.
To celebrate all that the church has achieved since the 'War on Wonga' began and to discern challenges the church should take up in the future, Theos, Capital Mass and St Paul's Institute are organising 'War on Wonga: Five Years On', an event held at St Paul's church, Hammersmith, on Tuesday July 10 from 7:30pm. Among the speakers are the Bishop of Kensington, Dr Graham Tomlin, the archbishop of Canterbury (via pre-recorded interview), Anna Jones, from the London Community Credit Union, and Tim Thorlby, managing director of Clean for Good.
Admission is free and tickets can be booked here.