LONDON (Reuters) - A former British investment banker and financial regulator launched a national network of churches, communities and credit unions on Tuesday that aims take on short-term lenders that charge high interest rates.
Hector Sants is leading a task force set up by the Church of England as part of a campaign against “payday lenders” spearheaded by Archbishop of Canterbury Justin Welby.
Lenders such as Wonga - which gives short-term loans at interest rates that work out at 5,853 percent on an annual basis - argue they fill a void left by high street banks and that the loans are meant to be repaid in a month, limiting the interest.
But Welby says payday loans - intended to tide borrowers over until the next pay packet - can drive vulnerable people into a debt spiral, and has pledged to put them out of business.
Sants, chairman of the Task Group on Responsible Lending, said the network bringing together churches and credit unions would initially be piloted in three of the Church of England’s 44 dioceses: Southwark, Liverpool, and London.
“This is a grass roots initiative that will only succeed with the enthusiasm and engagement of the local church,” Sants said in a statement.
“I am confident that the successful implementation of the Church Credit Champions Network will equip churches to be even more relevant to their local communities, and transform the lives of the many people we hope will be served as a result.”
The task force’s aim is to build support for community-based financial services and encourage responsible lending and saving, driving cultural change.
Credit unions, a small part of Britain’s financial landscape, have grown as banks cut back on loans after the credit crisis and typically offer much smaller loans than are available from larger banks and building societies.
They are companies owned by their own customers. The majority of the money they lend comes from members’ savings and they tend not to tap financial markets for capital.
Sants, 58, ran Britain’s Financial Services Authority (FSA) through the financial crisis and joined Barclays at the start of 2013. He was placed on sick leave in October that year for stress and left the bank a month later.
His new position is unpaid and will take up about one day a month, the church previously announced.
Welby, leader of the world’s 80 million Anglicans, was embarrassed last year to learn that the church’s pension fund had invested in a U.S. venture capital firm that led Wonga’s 2009 fundraising.
The church has yet to exit this investment, with its finance arm, the Church Commissioners, stating in its 2013 annual report last week that this could take “some considerable time”.
Reporting by Belinda Goldsmith; Editing by Robin Pomeroy