Ship of Fools: If you can't ban them, beat them

Thread: If you can't ban them, beat them Board: Oblivion / Ship of Fools.

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Posted by Anglican't (# 15292) on :

What do you make of the Archbishop of Canterbury's proposal to create credit unions to run the likes of Wonga out of business? I think it shows a bit of gumption.

Posted by goperryrevs (# 13504) on :

I think it's great.

Credit unions are a great, ethical, community-based source of saving and financial support, especially for people who can't get credit with the banks.

Pay-day loan companies are totally immoral. Charging any interest has been viewed as ethically wrong by the Church for the vast majority of its history. Even if we accept that it's acceptable in today's society, the interest rates that these companies charge should be illegal IMO, and are not much better than loan sharks.

Posted by Albertus (# 13356) on :

Agreed. Just the sort of thing that the Church should be looking to do, in the tradition of the monte di pieta. Announcement may be a bit hubristic but it's good fighting talk.

Posted by Adeodatus (# 4992) on :

Also agreed. In fact I think it's one of the best things I've heard out of the CofE for years.

Obviously, there are problems. Credit unions have limitations, and it may be that the volunteers who'll run them are least available in the places they're most needed. But even if this never got further than an aspiration, it's brilliant. It's long past time the Church took a stand against usury.

Posted by Jade Constable (# 17175) on :

Fantastic news, and I didn't expect such a brave move from ++Welby. Well done Canterbury!

Posted by Gill H (# 68) on :

Great news. There are lots of church-run credit unions already, and also organisations like CAP (Christians Against Poverty) who give free debt counselling and help people out of debt. Our church is a CAP centre and the difference this work makes in people's lives is inspiring.

Posted by Raptor Eye (# 16649) on :

I like the proposal, but with reservations. A church should be a house of prayer imv, & not a place for money-lenders. Church halls, no problem, as long as an eye is kept on those taking advantage of the generosity of the congregations by using their facilities, to ensure that they are genuine.

Posted by Erroneous Monk (# 10858) on :

I am supportive because I think that either it will succeed, or it will demonstrate why the payday loan companies are not already competing on price themselves and forcing rates down.

Of course, if it does succeed (ie if payday lender interest rates are what they are because they are villainous profiteers rather than because in a high risk industry they need a margin of safety on their rate of return in order to actually get the capital to lend) the next question will be what other non-competitive industries could the CoE break into?

Posted by Mere Nick (# 11827) on :

quote:
Originally posted by goperryrevs:

Charging any interest has been viewed as ethically wrong by the Church for the vast majority of its history. Even if we accept that it's acceptable in today's society, the interest rates that these companies charge should be illegal IMO, and are not much better than loan sharks.

Matthew 25:26-27 from the parable of the talents

26 “His master replied, ‘You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed? 27 Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.

I bet even Michael Corleone wouldn't charge the rates by this company that advertises here, though.

Posted by Mere Nick (# 11827) on :

quote:
Originally posted by Anglican't:
What do you make of the Archbishop of Canterbury's proposal to create credit unions to run the likes of Wonga out of business? I think it shows a bit of gumption.

"Wonga has said it charges about 1% a day on its consumer loans, which are short-term, and for small amounts."

Dude . . .

Posted by chris stiles (# 12641) on :

Credit Unions rely on a certain critical mass before they are self sustaining - so I hope the CofE's plans will include co-operating with existing Credit Unions where possible rather than blindly setting up their own.

I hope this refers to new initiatives, rather than talking up existing initiatives that have already been launched.

I'd also hope for a both/and approach - someone needs to continue to speak against the pay day lenders - especially since they've managed regulatory capture by funding the party of government.

Posted by Curiosity killed ... (# 11770) on :

It sounds a wonderful idea, but I have seen this attempted and not work brilliantly.

The local church here was where the (County Council) Credit Union was set up - it must have been 6 or 7 years ago, with volunteer support from the church. It is no longer in the church because it didn't get a great take up.

Two problems:

the way this credit union is set up, borrowing is only allowed by someone who has an account - built up by saving;
secondly, too many people wouldn't cross the church threshold.

It is still running, but now in the library, still run by a number of church volunteers. I'm not sure how great the take up is now and how well it is managing to compete against loan companies who will lend without an account.

Posted by Adeodatus (# 4992) on :

quote:
Originally posted by Mere Nick:
"Wonga has said it charges about 1% a day on its consumer loans, which are short-term, and for small amounts."

Dude . . .

They're meant to be short-term. They aren't always. And if my maths is right, 1% per day is still 34% in a typical month. If you need to borrow £100 to cover your bills this month, are you likely to be able to pay your bills and another £134 to the loan company next month?

Posted by Captain Chrism (# 11393) on :

Southwell diocese seems to be ahead of the game.
Southwell Diocese

Posted by The Midge (# 2398) on :

Perhaps there will be a Canterbury & York Building Society on day.

Good idea but if ministers and staff need payday loans to get by then funding such an enterprise might be a but challenging.

Posted by Erroneous Monk (# 10858) on :

quote:
Originally posted by Adeodatus:

quote:
Originally posted by Mere Nick:
"Wonga has said it charges about 1% a day on its consumer loans, which are short-term, and for small amounts."

Dude . . .
They're meant to be short-term. They aren't always. And if my maths is right, 1% per day is still 34% in a typical month. If you need to borrow £100 to cover your bills this month, are you likely to be able to pay your bills and another £134 to the loan company next month?

Of course you'd easily rack up at least £34, probably much more, if you went over your overdraft limit on your current account with a high street bank. Which is why payday lenders have lots of customers who do have other banking arrangements.

Posted by Erroneous Monk (# 10858) on :

I should have added to that that now the government owns a couple of high street banks, why haven't we seen the exhorbitant bank short term lending rate, disguised as fees and charges, come down?

Posted by The Midge (# 2398) on :

quote:
Originally posted by Erroneous Monk:
I should have added to that that now the government owns a couple of high street banks, why haven't we seen the exhorbitant bank short term lending rate, disguised as fees and charges, come down?

Because they want to reprivatize them and get all the money that was invested in them back again.

Posted by Erroneous Monk (# 10858) on :

Here, for example, are RBS's overdraft terms.

Posted by Erroneous Monk (# 10858) on :

quote:
Originally posted by The Midge:

quote:
Originally posted by Erroneous Monk:
I should have added to that that now the government owns a couple of high street banks, why haven't we seen the exhorbitant bank short term lending rate, disguised as fees and charges, come down?
Because they want to reprivatize them and get all the money that was invested in them back again.

But it seems to me that the particular opprobrium reserved for Wonga ignores the effective rate charged by high street banks (including government owned ones) for lending sometimes incredibly small amounts - £6?!

Posted by goperryrevs (# 13504) on :

quote:
Originally posted by Mere Nick:

quote:
Originally posted by goperryrevs:

Charging any interest has been viewed as ethically wrong by the Church for the vast majority of its history. Even if we accept that it's acceptable in today's society, the interest rates that these companies charge should be illegal IMO, and are not much better than loan sharks.
Matthew 25:26-27 from the parable of the talents

26 “His master replied, ‘You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed? 27 Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.

I'm very aware of that passage, and I'm sure we could play a game of proof text. But my point was that, however you interpret the bible, for the majority of its history, the church interpreted it & taught that any usury was wrong. So said three ecumenical councils, and AFAIK the church fathers were unanimous on it. That point still stands, whether or not we choose to disagree with them now, which IMO we're totally entitled to do. I just happen to agree with them.

Posted by Mere Nick (# 11827) on :

quote:
Originally posted by Adeodatus:

quote:
Originally posted by Mere Nick:
"Wonga has said it charges about 1% a day on its consumer loans, which are short-term, and for small amounts."

Dude . . .
They're meant to be short-term. They aren't always. And if my maths is right, 1% per day is still 34% in a typical month. If you need to borrow £100 to cover your bills this month, are you likely to be able to pay your bills and another £134 to the loan company next month?

It seems it would probably be tough. I can understand why someone would charge this much because of the costs involved in having an office, paying staff, taking applications, collecting money, and the like.

That's got to be a tough and lonely situation for the borrower. Most folks can talk to family, friends, their congregation, etc.

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by Adeodatus:
They're meant to be short-term. They aren't always. And if my maths is right, 1% per day is still 34% in a typical month. If you need to borrow £100 to cover your bills this month, are you likely to be able to pay your bills and another £134 to the loan company next month?

If you're borrowing money to meet your regular living expenses, you have a problem whatever the interest rate, and whoever the lender.

To me, Wonga makes sense, and really isn't expensive, for short term, unexpected spending - things like your car breaking, you have to find an extra hundred quid to have it fixed, today, and don't get paid till next week.

The "conventionally banked" would just put it on a credit card, and pay it off next month.

Credit unions are good things, and certainly have their place (and are a far better option for loans over several months or more), and they are a good way of providing banking to the unbanked.

But they're not a panacea, and they don't occupy quite the same niche as the payday lenders.

Posted by Martin PC not & Ship's Biohazard (# 368) on :

Banning them simply empowers criminals (as with gambling, drugs and prostitution) and there is no way to beat them, compete with them. The flat alternative is what we have: a free market.

Christianity needs to be above that.

Holding all things in common.

No chance.

Absolutely no chance.

Posted by Horseman Bree (# 5290) on :

Just to get out of the sterile (and circular) argument from proof-texts, try what Slacktivist had to say on the topic a few years ago. (You can follow his links for parts 2 and 3.)

Properly run, a credit union set up through the church should be acceptable, even if it actually operates off the church property.

And it may be a good opportunity for outreach and assistance...again, if done well. If it is just seen as an excuse for bible-thumping, it will serve no purpose at all.

Posted by deano (# 12063) on :

It boils down to this: do you want poor people borrowing money...

1) At high rates of interest but in a regulated market.

2) At high rates of interest but in an unregulated,. back street, loan-shark market.

Are the rates high in pay-day load companies? Yes, but at least they wont come round and beat up your kids for not paying, and you still having the debt afterwards.

My question is, where is the competition? What is stopping companies entering the market charging lower rates, and then lower, and then lower?

Competing on price results in a race to the bottom, so why isn't that happening?

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by deano:
It boils down to this: do you want poor people borrowing money...

1) At high rates of interest but in a regulated market.

2) At high rates of interest but in an unregulated,. back street, loan-shark market.

Are the rates high in pay-day load companies? Yes, but at least they wont come round and beat up your kids for not paying, and you still having the debt afterwards.

My question is, where is the competition? What is stopping companies entering the market charging lower rates, and then lower, and then lower?

Competing on price results in a race to the bottom, so why isn't that happening?

Duh, because banks are more interested in making a profit for their shareholders than in supplying unsecured credit to sub-prime borrowers. They pick and choose their customers.

Posted by Jay-Emm (# 11411) on :

It was nice to read two pages of comments on the BBC without the typical nasty ones you often find (of course in some cases the topic invites it).

So although my first thought this morning was that it was a bit cringe-worthy. It seems to have had the response a right action should (there's obviously some cases when being a voice in the wilderness is good, but...). Ohh it's changed now (Vince Cable supports it -verbally)

I liked the slackatist blog post linked. The phrase beginning "My more conservative evangelical..." is disappointingly accurate at times.

Posted by Avila (# 15541) on :

quote:
Originally posted by Raptor Eye:
I like the proposal, but with reservations. A church should be a house of prayer imv, & not a place for money-lenders. Church halls, no problem, as long as an eye is kept on those taking advantage of the generosity of the congregations by using their facilities, to ensure that they are genuine.

For hundreds of years when the church was the only community building it was the place of markets, farmers doing deals and all sorts of other things.

If tempted to quote the cleansing of the temple I see the issue there is that the stalls etc were in the only place that gentiles were allowed to pray - ie they had nowhere peaceful to go.

Generally churches using their buildings for other purposes still offer open access to areas where anyone can go and prayer. Maybe it is those of us with locked doors Mon-sat that would provoke Jesus' anger more than the traders these days for denying people a place to pray.

Posted by LeRoc (# 3216) on :

quote:
Avila: For hundreds of years when the church was the only community building it was the place of markets, farmers doing deals and all sorts of other things.

In many villages in inland Brazil it still is. They might not be doing their deals inside the church building (too hot) but definitely on the church grounds.

Posted by SvitlanaV2 (# 16967) on :

quote:
Originally posted by Curiosity killed ...:
It sounds a wonderful idea, but I have seen this attempted and not work brilliantly.

The local church here was where the (County Council) Credit Union was set up - it must have been 6 or 7 years ago, with volunteer support from the church. It is no longer in the church because it didn't get a great take up.

Two problems:
the way this credit union is set up, borrowing is only allowed by someone who has an account - built up by saving;
secondly, too many people wouldn't cross the church threshold.

It is still running, but now in the library.

Re the second point, when I heard about this on the radio today I did wonder about the likelihood of getting non-church people over the threshold to use the service. I know some churches that are doing well as community hubs for certain groups of people, but it takes time to build trust. I don't think it would be wise to start a credit union in a church where there's little or no recent history of community footfall, so to speak. What this means, though, is that only churches that already have their act together community-wise would be likely to benefit from this opportunity to serve.

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by Sioni Sais:
Duh, because banks are more interested in making a profit for their shareholders than in supplying unsecured credit to sub-prime borrowers. They pick and choose their customers.

The economics of credit unions aren't so terribly different. Yes, they don't need to make a profit, and don't have shareholders to satisfy, but the margins on commercial banking are actually not all that high - the big banks make so much money mostly because they have so much volume.

While a credit union doesn't need that profit, the same basic economic calculus applies - it has to expect to cover its costs, on average, on the loans it makes or it rapidly becomes an ex-credit union.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by deano:
It boils down to this: do you want poor people borrowing money...

Or you can take a good long look at our credit culture, and wonder if it has - perhaps - gone a little too far, and perhaps whether one ought to structure society and financial incentives differently.

To a large extent these companies are around because many people don't earn a living wage that can cope with emergencies.

Posted by Pyx_e (# 57) on :

I raised a weary head, gave a cheer from the depth of my slighted soul and my hand fell back to the plough. It’s ok for him who eats the finest bread, I spend all day looking at the horses arse. God’s creatures befouled in debt are but one part of the rich tapestry. By the time Justin’s dove reaches my lowly ears the cunning men will have stripped it of its vitality and so bound it in red tape it will resemble nothing more than a freshly shot pigeon, looking at me with its cold ashamed eye as we share the embarrassing thought of what might have been.

It’s been a hard day.

Fly Safe, Pyx_e

Posted by Avila (# 15541) on :

This is where the different types of community vary. Here in the rural area - small communities and with many of the primary schools CofE linked - people are much more familiar with going into the church for a variety of things from the local choir concert to the school leavers' service.

I think that supporting existing groups is the way to go, and offering another collection point in a neighbouring community as an extension can be of real benefit, but if the village hall, or town library is at better place then go with that.

Posted by moonlitdoor (# 11707) on :

quote:

originally posted by Sioni Sais

Duh, because banks are more interested in making a profit for their shareholders than in supplying unsecured credit to sub-prime borrowers. They pick and choose their customers.

You seem to be missing deano's point here. It would seem that payday loan rates are extremely high and that it should be possible to make a profit charging lower rates. One would expect someone to be attempting to do that and gain market share by undercutting the other lenders.

Retail banking isn't a very competitive market, cost of entry is very high, not that easy to get a licence, extensive regulation. Pay day lending by contrast is quite easy to get into in the UK, cost of entry is low, so there are dozens of companies operating, which means it ought to be quite competitive.

I think it's quite good if the church can help credit unions but I struggle to see how credit unions will replace pay day lenders, as credit unions normally work for people who are sometimes savers and sometimes borrowers, whereas pay day lenders' customers are more likely to be people who are nearly always borrowers.

Posted by The Midge (# 2398) on :

Oh dear! This is rather embarrassing Welby is furious that CofE is a Wonga investor. [Disappointed]

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by moonlitdoor:

quote:

originally posted by Sioni Sais

Duh, because banks are more interested in making a profit for their shareholders than in supplying unsecured credit to sub-prime borrowers. They pick and choose their customers.

You seem to be missing deano's point here. It would seem that payday loan rates are extremely high and that it should be possible to make a profit charging lower rates. One would expect someone to be attempting to do that and gain market share by undercutting the other lenders.

That would happen in a free market, but the market for banking, as for everything else, is distorted by financial muscle which enables those who have economic power to influence government policy.

quote:

Retail banking isn't a very competitive market, cost of entry is very high, not that easy to get a licence, extensive regulation. Pay day lending by contrast is quite easy to get into in the UK, cost of entry is low, so there are dozens of companies operating, which means it ought to be quite competitive.

As you say, retail banking is highly regulated and difficult to enter. Do you think for a moment that the existing retail bankers actually want competition??

quote:

I think it's quite good if the church can help credit unions but I struggle to see how credit unions will replace pay day lenders, as credit unions normally work for people who are sometimes savers and sometimes borrowers, whereas pay day lenders' customers are more likely to be people who are nearly always borrowers.

It looks like the government is already acting to improve the economics of credit unions, althout 3% per month still looks like usury to me. Credit unions provide a substantial proportion of personal banking in the USA and, with the major banks hamstrung by their concentration on speculative activities there is room in the market, but I don't think the big retail bankers want anyone else in there, and their vested interests are far more powerful than those of the pay-day lenders.

Posted by TonyK (# 35) on :

quote:
Originally posted by The Midge:
Oh dear! This is rather embarrassing Welby is furious that CofE is a Wonga investor.

Left Hand - meet Right Hand [Big Grin]

Posted by daronmedway (# 3012) on :

Maybe Welby should sort out this hypocritical little gem of policy before he does any more sabre rattling. Full article here.

quote:
The Church's Ethical Investment Advisory Group "recommends against investment" in companies which make more than 3% of their income from pornography, 10% from military products and services, or 25% from other industries such as gambling, alcohol and high interest rate lenders.

[ 26. July 2013, 09:24: Message edited by: daronmedway ]

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by chris stiles:
Or you can take a good long look at our credit culture, and wonder if it has - perhaps - gone a little too far, and perhaps whether one ought to structure society and financial incentives differently.

Suggest a system that would work better, then.

Posted by Erroneous Monk (# 10858) on :

quote:
Originally posted by Sioni Sais:

As you say, retail banking is highly regulated and difficult to enter. Do you think for a moment that the existing retail bankers actually want competition??

I'm not sure you're getting moonlitdoor's point which is that payday lenders *aren't* regulated like banks.

To set up a payday loan company, you need to be able to get someone to lend money to you, which you can lend on to the sub-sub-prime market. You need to charge a rate of interest that covers your costs, and the very high rate of interest you are being charged by the entity loaning to you (very high, because your credit risk reflects the credit risk of the people you lend to).

On the radio this morning, some bloke was suggesting that the CoE could finance its ethical payday loans out of the CoE pension fund! Now, if you're relying on that fund for your survival in retirement, what rate of interest do you want the fund to charge the credit union to borrow your cash and lend it to sub-sub-prime borrowers? Quite a high one, I think.

So the credit union/payday lender has to lend on at a high rate. The credit union might be able to undercut Wonga because:
- some of its people are volunteers
- it doesn't want to make a profit itself

But given we have a free market, you wouldn't expect a credit union to be able to undercut a payday lender for any other reason

So, as I said above, this exercise will be interesting, if nothing else, because it will show us exactly what part of Wonga's interest rate goes to cover admin and profit, and what part is simply the market cost of lending to the sub-sub-prime market.

Posted by QLib (# 43) on :

When I first heard it, I thought it was a great initiative, but I wonder if it will work. I suspect that one of the attractions of payday loans is that not many questions are asked, whereas I guess Credit Unions have to ask questions. What the Church-backed initiative may end up doing, is cream off the top end of the market (those most sensible, responsible and likely to be able to pay back) and leave the feckless, helpless and hopeless still at the mercy of the sharks. I fear it's a sticking plaster on a wound.

Posted by Sioni Sais (# 5713) on :

Erroneous Monk, where do you, or anyone else, get the idea we have a free market? The market is subject to nothing but The Golden Rule, namely those who have the gold, make the rules.

Concentrated economic power, whether selling (eg, credit providers) or buying (eg, supermarket chains) will distort any market, and there is hardly a market that doesn't have a major player. In the 1970's some trade unions did it and in the renaissance, before modern capitalism, the guilds and chartered companies did so too.

I suppose therefore it has a long and honourable history. There is probably scripture, for and against the concentration of wealth.

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by QLib:
What the Church-backed initiative may end up doing, is cream off the top end of the market (those most sensible, responsible and likely to be able to pay back) and leave the feckless, helpless and hopeless still at the mercy of the sharks. I fear it's a sticking plaster on a wound.

Either that or they'll end up bankrupting the church by losing money on people who never repay their debt and not generating enough interest from the ones who do repay to cover those losses.

Posted by moonlitdoor (# 11707) on :

Erroneous Monk, do you know whether anyone has tried starting up peer to peer lending in this short term loan market ?

That I think would be a more direct competitior to pay day loan companies than credit unions are. Peer to peer lending would be quite effective in finding the true cost of providing this sort of finance, and also gives an opportunity for those who would like to help provide cheaper credit to put their money where their mouth is.

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by moonlitdoor:
Erroneous Monk, do you know whether anyone has tried starting up peer to peer lending in this short term loan market ?

That I think would be a more direct competitior to pay day loan companies than credit unions are. Peer to peer lending would be quite effective in finding the true cost of providing this sort of finance, and also gives an opportunity for those who would like to help provide cheaper credit to put their money where their mouth is.

Not quite what you have in mind, but this is a "personal guarantor" scheme.

I've no idea how effective it is or how long-lived it will prove to be. Still doesn't look cheap, but comparable to the proposed credit union limits.

Posted by Erroneous Monk (# 10858) on :

quote:
Originally posted by moonlitdoor:
Erroneous Monk, do you know whether anyone has tried starting up peer to peer lending in this short term loan market ?

That I think would be a more direct competitior to pay day loan companies than credit unions are. Peer to peer lending would be quite effective in finding the true cost of providing this sort of finance, and also gives an opportunity for those who would like to help provide cheaper credit to put their money where their mouth is.

Isn't peer to peer lending in this market just your desperate mate saying "Ah please, go on, buy my [insert time sensitive purchase such as gig tickets, train fare, round of drink] for me - I haven't got the cash now but I'll give it straight back to you as soon as my pay clears"?

And of course, they don't. And then they do the same the next time. And at some point they hit an arbitrary limit you've set and you just say no, no more, and write it all off to experience?

Posted by Curiosity killed ... (# 11770) on :

Another local initiative works to provide people with deposits for rented accommodation along those lines - acting as a personal guarantor and/or providing the deposit. The charity also checks the flats / houses before and after occupancy and sorts out any minor difficulties to minimise the risk. Again this is voluntarily run by an ecumenical church group. That one has been running for a number of years too.

Posted by Erroneous Monk (# 10858) on :

quote:
Originally posted by Sioni Sais:

quote:
Originally posted by moonlitdoor:
Erroneous Monk, do you know whether anyone has tried starting up peer to peer lending in this short term loan market ?

That I think would be a more direct competitior to pay day loan companies than credit unions are. Peer to peer lending would be quite effective in finding the true cost of providing this sort of finance, and also gives an opportunity for those who would like to help provide cheaper credit to put their money where their mouth is.
Not quite what you have in mind, but this is a "personal guarantor" scheme.

I've no idea how effective it is or how long-lived it will prove to be. Still doesn't look cheap, but comparable to the proposed credit union limits.

This is quite cool though I'd either want a recourse arrangement with the borrower or it'd have to be an amount I was just prepared to give away and a person I was just prepared to give it to.

There's also Lend With Care though not for UK entrepreneurs.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by moonlitdoor:
Peer to peer lending would be quite effective in finding the true cost of providing this sort of finance

Except that most people don't have the sort of cash that would enable them to run a portfolio of loans to eliminate the risk of default.

They could - of course - get together with other like minded people and form some kind of 'union' to lend on credit with reasonable rates ...

Posted by moonlitdoor (# 11707) on :

I guess it depends what you mean by that sort of money. I am lending 800 pounds through Zopa, participating in 40 loans with 20 pounds in each. Of course these loans are for 3 years normally, but it seems to me that the same may work for short term loans though admin costs would be much higher.

Posted by Oscar the Grouch (# 1916) on :

With regards to Welby's comments, I am afraid that I found myself shaking my head. I really don't think he is the sharpest knife in the drawer.

Of course payday lenders are to be opposed. Of course credit unions are a Good Thing.

But once you stop to think for a nanosecond, what he says is utter tosh:

quote:
"we’re not in the business of trying to legislate you out of existence, we’re trying to compete you out of existence"

a) Why aren't we trying to legislate these leeches on the poor out of business? Their interest rates are plain usury and should be dealt with as such. They are no better than backstreet loansharks. They prey on the vulnerable and gullible and the end result is deepening debt for the despairing suckers who turn to them.

b) Any idea that credit unions can "compete" with payday lenders is nonsense. As is the suggestion that credit unions will one day put Wonga out of business. For that to happen, there would need to be an enormous input of money into credit unions. Where is that money to come from?

c) Archbishop Justin also needs to have done some basic research about the C of E's investments. Surely it isn't rocket science? Before you make a big bold statement, you get your facts right. Surely it wouldn't have taken that long to ask someone to check "are we in any way invested in the likes of Wonga?"

d) I am increasingly disturbed by the fact that Archbishop Justin seems to see himself as chaplain to the finance industry, rather than Archbishop of Canterbury. I'm not saying that financial issues are unimportant, or not worthy of theological comment - but if this is all he has to offer, then the C of E is in real doo-dah.

In short, he comes across to me as naive, ill-prepared and rather limited. I hope that he is not also developing a tendency to be accident prone.

Posted by Gwai (# 11076) on :

How does getting mad about payday loans and starting a credit union imply one is chaplain to the finance industry?

[ 26. July 2013, 15:12: Message edited by: Gwai ]

Posted by Arethosemyfeet (# 17047) on :

To be frank, at least he's talking about money rather than sex.

Posted by Erroneous Monk (# 10858) on :

quote:
Originally posted by Arethosemyfeet:
To be frank, at least he's talking about money rather than sex.

Posted by Oscar the Grouch (# 1916) on :

quote:
Originally posted by Gwai:
How does getting mad about payday loans and starting a credit union imply one is chaplain to the finance industry?

Pretty much the only significant statements he has made so far have been about financial matters. The Kingdom of God is more than money.....

(And it hasn't helped that what he has said has veered between the bleeding obvious and the banal)

Posted by BroJames (# 9636) on :

quote:
Originally posted by Oscar the Grouch:

quote:
Originally posted by Gwai:
How does getting mad about payday loans and starting a credit union imply one is chaplain to the finance industry?
Pretty much the only significant statements he has made so far have been about financial matters. The Kingdom of God is more than money.....

Looking back at speeches, sermons and news releases over the last few months, I would say that's pretty wide of the mark (though we might disagree on what counts as significant). I am also glad that in the interview on Today this morning he managed to emphasise the ministry of the Church in sharing the live of Jesus.

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by BroJames:

quote:
Originally posted by Oscar the Grouch:

quote:
Originally posted by Gwai:
How does getting mad about payday loans and starting a credit union imply one is chaplain to the finance industry?
Pretty much the only significant statements he has made so far have been about financial matters. The Kingdom of God is more than money.....
Looking back at speeches, sermons and news releases over the last few months, I would say that's pretty wide of the mark (though we might disagree on what counts as significant). I am also glad that in the interview on Today this morning he managed to emphasise the ministry of the Church in sharing the live of Jesus.

It might be true that his pronouncements on financial matters are front page news but that is because of his background. Had he been an England cricketer then anything he said about sport would be on the front and back pages.

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by Sioni Sais:
Erroneous Monk, where do you, or anyone else, get the idea we have a free market? The market is subject to nothing but The Golden Rule, namely those who have the gold, make the rules.

This doesn't really matter. Assuming that a credit union is going to operate as an ongoing concern, rather than as a charity with some external source of funding, it has to cover its costs.

As various people have mentioned, the credit union doesn't need to generate a profit, and might be able to use some volunteer labour to minimize costs, but the fundamentals remain the same - the credit union has to expect, on average, to get its money back on a loan plus a little bit extra.

The default rate of people in precarious circumstances is quite high. Several people have talked about "evil" payday lenders taking advantage of the vulnerable. I want to ignore the payday lender and look at the vulnerable client - someone who has been described several times in this discussion as a person who can't afford to pay his bills, and so next month can't afford to pay his next month's bills plus the loan repayment and so on.

If you run out of money every month, and need to borrow extra every month, no lender is going to fix your problem. Sure - compounding short term loans with Wonga is going to dump you further down the toilet faster, but your fundamental problem is that your expenditure exceeds your income. The help this person needs is either help getting more money or help spending less. A credit union loan isn't useful (and this person wouldn't be given one anyway, because they can't afford to repay it).

If, on the other hand, we're talking about someone who can usually make ends meet, but has unexpectedly high expenses this month (the car he uses to get to work needs repairing, say, or he needs to move home, and has to find a month's rent in advance as a deposit) then a loan is exactly what he needs - but if he really only needs the money until next payday, then Wonga isn't that expensive - I'd be really surprised if a credit union could do much better for a 2 or 3 week loan.

I am a fan of credit unions, but I'm skeptical that they can actually take much of the business that the likes of Wonga gets.

Posted by Martin PC not & Ship's Biohazard (# 368) on :

Terribly wise.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by moonlitdoor:
I guess it depends what you mean by that sort of money. I am lending 800 pounds through Zopa, participating in 40 loans with 20 pounds in each. Of course these loans are for 3 years normally, but it seems to me that the same may work for short term loans though admin costs would be much higher.

The admin costs would be much higher. Zopa is a bit of a red herring, for the vast majority of loans it operates virtually identically to a credit union of sorts - as the heavy lifting in terms of risk assessment has already been done, and there is some implicit pooling of risk via the fact that everyone pays fees that are then used for a certain amount of insurance (in this case sending bad loans to the debt collectors). At its edges the more speculative loans are basically gambling without any pooling of risk - as the average user wouldn't have a clue how to manage the risk themselves.

It's a kind of rapture of the nerds solution to a problem

Posted by moonlitdoor (# 11707) on :

I have no idea what a revenge of the nerds solution means but I suppose it is intended to insult me for taking part in it.

I just wondered whether a similar scheme could be an effective competitor to pay day loan companies in the short term load market. It's not clear from what you wrote why you don't think it could.

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by Leorning Cniht:
<snip>

If you run out of money every month, and need to borrow extra every month, no lender is going to fix your problem. Sure - compounding short term loans with Wonga is going to dump you further down the toilet faster, but your fundamental problem is that your expenditure exceeds your income. The help this person needs is either help getting more money or help spending less. A credit union loan isn't useful (and this person wouldn't be given one anyway, because they can't afford to repay it).

If, on the other hand, we're talking about someone who can usually make ends meet, but has unexpectedly high expenses this month (the car he uses to get to work needs repairing, say, or he needs to move home, and has to find a month's rent in advance as a deposit) then a loan is exactly what he needs - but if he really only needs the money until next payday, then Wonga isn't that expensive - I'd be really surprised if a credit union could do much better for a 2 or 3 week loan.

I am a fan of credit unions, but I'm skeptical that they can actually take much of the business that the likes of Wonga gets.

Thanks, I think you have taken that step beyond looking at credit providers to the many reasons for credit demand. Sometimes this really is exceptional and short-term lending is a valid solution whether throuh pay-day loans or a credit card with a high rate of interest; a few years ago when my credit rating kept Readers Digest away I got such a card (APR 41% IIRC) and because I set up a direct debit to clear the balance every month (just after pay day), I got a mainstream card a year or so later. On the other hand when someone has month left at the end of the money every month, a different solution is needed. Whether that is lower outgoings or higher income is a moot point. Right now, certainly in the UK, many people in work, let alone those on benefits, haven't seen any increase in income four years, let alone one in real terms, and prices haven't come down.

Maybe the ABC, or the church as a whole, needs to look at the wider picture, although I'm sure they will be accused of "meddling in politics" by the some in the media and a few politicians.

Posted by Curiosity killed ... (# 11770) on :

The Archbishop of York, John Sentanu is campaigning on the issues around poverty - it's what his twitter feed has been full of for the last couple of weeks.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by moonlitdoor:
I just wondered whether a similar scheme could be an effective competitor to pay day loan companies in the short term load market. It's not clear from what you wrote why you don't think it could.

They could - but as they scale themselves up they are acting more and more like a profit making credit union (which is reflected in their rates which are generally worse than what people would get from a well run credit union). There isn't much p2p about it - they already do the risk assessments, and carefully promote applications so that the maximum number of loans are made, and so that loans very close to being funded meet their targets. You can see part of this in the fact that the listings feature was discontinued some time ago.

The extension of this is something like Kiva - where if you read the small print, the heart warming story you are getting need not necessarily bear much connection to reality. Instead of lending to Titus the aubergine farmer, you are actually giving to Tanzania Microfinance Inc.

These things have their place, but it's a niche, not a general solution. You can't create a lending sector by sprinkling magic techno pixie dust on things. In essence the larger Zopa grows, the more they become like either a for profits Credit Union, or a Bank.

Posted by moonlitdoor (# 11707) on :

I wasn't thinking so much of the technology as that it brings capital from different sources. I know a few people at work who lend via zopa. I can't see them joining credit unions or doing Kiva because they're not trying to help anyone apart from themselves, they are just regarding it as an investment.

Nevertheless the people borrowing from them are getting a reasonable rate compared with a bank loan.

What I do like about Justin Welby's proposal is precisely that it is not the campaigning on wider issues that others have talked about. The church of England bishops do like to provide a running social commentary but I am not sure how many people are interested in it. I much prefer this attempt to actually do something practical rather than just criticising other elements of society.

Posted by balaam (# 4543) on :

Talking of Church of England bishops, The Bishop of Bradford has waded into the debate by calling Wonga and their like "spivs."

Can't say I disagree with him.

[FYI he is also a director of Ecclesiastic Insurance.]

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