Union could 
expand to beat payday firms

Banbridge credit union could be one of many given help to expand after Business Secretary Vince Cable backed a plan by the Archbishop of Canterbury to force the online lender Wonga out of business - by competing against it.

The Most Rev Justin Welby told Wonga boss Errol Damelin the Church of England would do this by expanding credit unions.

These would act as an alternative to payday lenders.

Mr Cable said that the government was considering ways of regulating the industry.

“We’re looking at whether we can stop advertising drawing people into payday lending who perhaps shouldn’t be using it.”

Archbishop Welby said the plan is to create “credit unions that are... engaged in their communities.”

Mr Damelin said he was “all for better consumer choice”.

Payday firms offer short-term loans, often at high interest rates.

The Association of British Credit Unions said it was a good idea to harness the skills among church congregations to help credit unions grow.

“We believe it is speed and convenience which attracts people to payday lenders, not the short term nature of the loans. The amount of loans which are rolled over demonstrates how the short-term nature of the product is in itself not in the best interests of consumers - even before the high interest charges are added on,” 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.”

However, the association accepted that credit unions could do more to compete with payday lenders.

In April, the government announced an investment of £36m in credit unions, to help them offer an alternative to payday lenders.

The lender said there was room for more competition in the market.

“The Archbishop is an exceptional individual, with our discussions ranging from the future of banking and financial services to the emerging digital society,” Mr Damelin of Wonga said.

“On his ideas for competing with us, Wonga welcomes competition from any quarter that gives the consumer greater choice in effectively managing their financial affairs.”