...a blog by Richard Flowers

Wednesday, July 31, 2013

Day 4590: Moneylenders in the Temple


You have, presumably, heard how one of Britain’s biggest landowners is to use its enormous capital reserves to try and bankrupt a recent successful start-up company.

Although you MIGHT have heard that reported as: “Church of England to force Wonga out of business”.

This initiative from everyone’s favourite establishment theocracy comes after the Government announced that the monthly interest that credit unions can charge will increase from 2% to 3%. That’s an increase of 26.8% APR to 42.6% APR.

So it looks like the Church only got interested when credit unions went from being CHARITABLE loans to PROFITABLE ones.

Is it necessarily a BAD thing that the Church might bankrupt Wonga? Mr Dr Vince doesn’t seem to think so. Competition is, after all, supposed to be HEALTHY and – we’re told – result in a BETTER outcome (in this case lower interest rates) for the consumer.

But I’m concerned.

Firstly, Wonga charges such high interest rates because they accept a high degree of RISK in the people that they lend to. Will the CofE be willing to sustain very high levels of losses, or will they be offering loans only to much safer borrowers? Will they, in fact, not be competing with Wonga at all, but rather with existing credit unions?

Secondly, is the problem of debt not that people are getting into more debt than they can afford? Offering them CHEAPER loans will encourage MORE borrowing, people who might have been DISCOURAGED by Wonga’s high interest rates might be encouraged to take out borrowing with a lower “Church” rate. Cheap lending, after all, is what fuelled the BOOM that led to the BUST of the Mr Frown years.

But, perhaps more importantly, I’m worried about setting a precedent of letting a religious organisation – ostensibly one with the power of the state behind it, too – decide to eliminate a legitimate, legal, if slightly odious business on ostensibly dogmatic grounds. Would we be as sanguine if the Church said it was going to use its property portfolio to start blocking planning applications for HS2? Or that they were to begin buying up buildings used for “immoral purposes” (whatever the Church decided that might mean) in order to put a stop to that?

Or it could all turn into an incompetent mess...

To move the story completely into “you couldn’t make it up” territory, within 24 hours the newly created Arch-Banker of Canterbury, Mr Justin Wibbly, had to admit to EMBARRASSMENT when it turned out that the Church is in fact an investor in Wonga.

Perhaps the DAILY MASH covers this best: “Bible story of Jesus and the moneylenders is still on his ‘to-do’ list.”

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