Wonga and credit unions: what’s it got to do with the Church?

1. Wonga and credit unions: what’s it got to do with the Church? Tom Sefton Adviser on Economics and Social Policy, Mission & Public Affairs, Church of England

2. Problem debt in the UK • 8.8m households (18%) are over-indebted • A much higher proportion are at risk – 51% are struggling to keep up • 46% of families have savings of less than £500 • Consumer debt has trebled in 20 years to £158bn (or £6,000 per h/hold) • Citizens Advice expect demand for debt advice to double in the next 5 years • Up to 7m people are dependent on high-cost credit (totalling £7.5bn in 2008 and rising)

3. What’s wrong with Wonga? • Flawed business model: not a few rogue traders • Not just about high interest rates: • Inappropriate product (esp. for essentials) • Inadequate affordability checks • Misuse of CPAs • Reliance on rollovers • Aggressive debt collection practices • Heavy advertising: culture of ‘instant credit’

4. What can be done? • Need for more effective regulation to deal with worst excesses – some progress here • But, also need alternatives to meet the growing demand for affordable credit • Myth of ‘free banking’ – unfair that those who can least afford it pay most for banking • Need also for a cultural shift in our attitudes to borrowing and saving

5. Archbishop’s vision • To help develop a modern, expanded credit union sector – real alternative to payday loans • Collaborative effort – working in partnership with, and encouraging, others • Long-term commitment - 10+yrs • Task Group - focused on a few strategic, practical initiatives

6. “Our faith in Christ calls us to love the poor and vulnerable with our actions. That is why the Church must be actively involved in supporting the development of real lending alternatives, such as credit unions. This is not an optional activity, but a fundamental part of our witness and service to all God’s people.” The RtRevd Justin Welby

7. What are credit unions? • Similar to banks, but run for the benefit of members: • Members share a common bond • Members’ savings are lent out to other members • Members have a say in how it is run • Clear set of aims and values: • Encouraging members to save, as well as borrow • Offering loans at affordable rates (max 3%/mth) • Empowering members to use their money wisely • Using members’ savings for the mutual benefit of the community

9. Key messages • CUs are for everyone - notthe ‘poor man’s bank’ – need to attract a broader range of members • Responsible alternative for savings and loans – not competing (directly) with payday lenders • Lending to people at a price they can afford – education and advice, too • Helping communities to help themselves – money recycled in local economy (not external shareholders) • Need for a more professional image – talking about volunteer-run organisations puts off target group

10. The challenges... • How to ‘sell’ credit unions to a broader section of the population? • How to grow the sector without sacrificing its distinctive ethos? • How to help the most financially excluded, whilst also becoming financially sustainable? • How best to support such a diverse and fragmented sector?

11. ...and opportunities.. • A core part of our Christian mission: “I hope that through what has happened here, more people will say that debt is a scourge on our society which should not exist, and that wherever someone is in debt and isolated, as the Church of Jesus Christ, we will be there” (Revd Lesley Jones) • Church is right at the centre of the public debate and response to these issues • Church can take the lead in challenging our society’s attitude to money – “the last taboo” • Moving from charity to social justice...

12. Churchgoers’ attitudes • Desire for a more ethical financial system • Positive about credit unions in principle… • …but also some concerns: • Low levels of awareness/ knowledge • Perceived lack of professionalism? • People don’t see the need to join • Confusion about how to help

13. How can churches help? • Champions: raising awareness • Clients: active members of CUs • Critical friends: pressure to improve • Capacity-builders: volunteers and buildings • Connectors: using church networks • Collaborators: working together

15. Murston Community Bank Nottingham Credit Union 100 x 100 scheme Manchester diocese marketing campaign

16. (1) Financial education • Working with CUs to promote financial education, starting in church primary schools • Standardised schools package • Savings club • Accredited lesson plans • Trained volunteers • Whole school approach

17. (2) Local capacity-building • Encouraging grassroots church support for CUs and related services • Church Credit Champions Network - matching CU needs to parish resources: • Engaging churches • Training Credit Champions • Encouraging church-based actions • Church ‘hubs’ providing holistic support, including debt/money advice

18. (3) Influencing/ lobbying • Lobbying for policies to support growth of CUs and promote responsible credit & savings • Harnessing support of high street banks e.g. Lloyds, Barclays • Working with, and encouraging, other potential partners

19. (4) Direct provision of services • Supporting establishment of Churches Mutual Credit Union – launching in the Autumn • Exploring other innovative approaches to delivering responsible credit

20. Questions?