Making what is Good Appealing

The problem isn’t quite as old as the hills, but it’s pretty ancient. You know you’ve got money coming in at a set time – the end of the week, the end of the month, when someone pays your invoice or the debt they owe you – but two days before that, you get hit with a big bill, or just the need to feed your family, and the piggy bank is empty. What do you do?

The solution is as old as the problem – you borrow.

The trouble is, when you’re desperate, the person lending to you is in a very strong position to set whatever terms he or she wants: enter the Pay Day Loan companies.

These companies, which grant quick, short-term loans to tide you over to your next pay day, have been around for years, but the one that’s making all the noise, and gaining a global, online reach is called Wonga.

Wonga’s TV adverts are cute and funny, featuring puppets of three elderly people (for reasons I haven’t been able to figure out – perhaps due to them steering away from stereotyping the kinds of customers they’re targetting?), who mention nothing about money or loans, but advertise the company strapline: Straight Talking Money.

So what’s the problem?

The company offers a fun, fresh, quick, easy online way to borrow small amounts of money for a short time (up to £400 for 45 days, rising to £1,000 once your ‘trust rating’ with them increases). And, as their strapline suggests, they make no secret of the cost of the loan, or the fact that the interest you will pay is equivalent to an APR (Annual Percentage Rate) of 5853%. Yep, you read that right, 5853% interest. Gulp!

Now, they explain in this little video that APR isn’t really a good measure to use when considering the price of a short term loan – it is based on the cost you would incur if you didn’t pay the loan off for a whole year, which they say they would never allow to happen. The reason it is there, though, is to help borrowers compare costs with other lending options, which by law all have to display their APR. Credit cards, as an example, typically charge less than 20% APR, though some are much higher (and some have much lower introductory rates).

The actual charges you’ll pay, if you pay the loan off on time, are very clear, but as in this worked example, they do mount up very quickly:

A loan of £100 over 30 days incurs costs of over £37 – or 37% (31.5% if you deduct the £5.50 flat fee). That is far more than you would incur on a standard credit card, and if you pay off your credit card in full every month, you normally don’t incur any fees or interest (for certain activities, like gambling, interest begins to accrue the moment the payment is made, so you can incur large costs this way, and of course, all debt is debt and can quickly lead to problems).

Despite the high costs, however, Wonga is doing a roaring trade, which is worrying the sorts of people who worry about these things – debt, poverty, the rich taking advantage of the vulnerable, those kinds of things.

A brilliant move

But the Archbishop of Canterbury, Justin Welby, in another brilliant move, has come out against introducing legislation to curb the activities of this company and others like it. Rather, he suggests, let’s do something better.

In an interview with Total Politics, he said that the Church of England is looking to set up new – and support existing – Credit Unions – lenders which, unlike the ‘fully automated’ Wonga, “are both engaged in their communities and are much more professional”.

I love this attitude. I love its positivity. It is often said that Christians are known more for what they’re against than what they’re for. We have a reputation for condemning actions without offering alternatives. Justin Welby is different. He’s aware that Wonga is meeting a need and wants to find a better way of meeting that need. He wants to put Wonga out of business, as he made very clear when he met with its founder, Errol Damelin, but he wants to do it by creating something better, something people will choose because it is better for them, and thus something which will be better for society as a whole.

What a great approach. You can force people to do good, or to pick the right option, or you can entice them to. All too often in our broken world, the damaging, fruitless, hopeless action is the most appealing. I fully support anything the Church, Christians individually or other good people do to make the good choices more appealing. Well done, Archbishop Justin!