Church pull out of bid for Wonga’s £400m loan book.

With the collapse of the Payday lender, Wonga, concerns are now focused on what will happen to the people who have outstanding debts with the company.

They have been told that their debts will not be written off and they must continue to pay them back as before. So, who will they pay them back to now?

Church of England won’t be buying loan book.

This week, the Archbishop of Canterbury, Justin Welby and the Church of England held a series of meetings to discuss buying the loan book of Wonga, in order to prevent the debts of its borrowers being sold to another high-interest loan firm.

The Church of England has now pulled out, following a week of talks led by the Archbishop.

The move creates fresh uncertainty for around 200,000 borrowers who could now be forced to pay back their debts at high rates by a commercial lending firm.

The Archbishop said on Friday, after the decision by the C of E commissioners not to use part of their £8.2bn investment portfolio to take over Wonga, that the potential investors he has been in talks with are now expected to make a bid for the estimated £400m loan book.

Investors and charities asked to form consortium.

Some commentators believe that it was a silly idea of the Archbishops in the first place.  To be fair, he was still cautious enough to wish to share out Wonga’s £400m of loans across a number of investors, including charities and others.

One commentator expressed the view that if a new Welby-Wonga lost money – then what? Who would subsidise those losses? The nature of lending to the poor is that they do tend to default. The sky-high interest rates charged by payday lenders accounted for the high default rate and cost of recovering bad debts through the courts.

That said, before rates were capped in 2015 at 1,500%, Wonga were charging borrowers interest rates as high as 5,853% per annum, which saw Welby repeatedly clashing with the payday lender.

In 2013 Welby told Wonga’s chief executive he wanted to put the company out of business by supporting rival community lending schemes.

The Archbishop has continued to meet with financial investors and charitable foundations in an effort to form a consortium that could have ultimately resulted in the creation of an ethical payday lender.

What the Church Commissioners said.

The church said in a statement: “The church understands that confidential approaches may now be made by those interested parties to the administrators of Wonga’s UK loan book. The Church of England will not be party to continuing discussions given their commercially sensitive nature.”

Last week, the Archbishop told the TUC conference: “I said to the chief executive of Wonga that I wanted credit unions to compete him out of business. Well, he’s gone!”

The church commissioners are understood to have argued that they did not have the expertise to properly value the distressed loan book and they were concerned that the need to write off certain loans could be legally problematical given its status as an entity set up to benefit of the church.

“My chief concern has been to ensure that the poor and vulnerable are as well protected as possible following the collapse of Wonga’s UK business,” Welby said. “I fully support and respect the decision of the church commissioners not to participate in a potential buy out. They have given this option close attention and I thank them for their time, advice and consideration.”

He continued: “I will be continuing to examine ways to make affordable credit, debt advice and support more widely available and convening interested parties at Lambeth Palace. If we make the economy fairer for all, we will also make it stronger. When prosperity and justice go hand in hand, every part of society benefits.”

MP asks the Archbishop to help protect poorer people.

Frank Field, the independent MP and chairman of the Commons work and pensions committee, had written to the Archbishop of Canterbury asking him to use the church’s £7.8 billion investment fund to buy Wonga’s debt portfolio. On Twitter, Mr Field, who served as minister for welfare reform in Tony Blair’s government, said he was concerned that Wonga’s administrators would sell its loans on to debt recovery businesses at “knockdown rates”.

“Money-recovery agencies will no doubt attempt to buy these very cheaply, and make a lot of money from them. I’ve asked the administrators to remain open to a consortium of people of good will to buy the debts and deal properly with them, in a way that protects poorer people. I’ve also asked the Archbishop of Canterbury whether he might begin to build up that consortium.”