An alliance of churches is to wage all-out war against payday loan companies by setting up their own free rival credit union to help people in need of financial help.

 

The new movement which includes the churches of Scotland and England will today launch the non-profit lending facility which is initially open to ministers, elders and Kirk workers.

But the group aims to eventually extend it outside the religious community to the general public in an attempt to alleviate the problems faced by many customers of unscrupulous lenders who are mired in debt.

Archbishop of Canterbury Justin Welby slammed payday lending as "usury" and warned the Church would try challenge firms like Wonga and "compete them out of business".

Rt Rev John Chalmers, Moderator of the General Assembly of the Church of Scotland, said there is now "a new player in the marketplace" after the joint venture received financial regulatory backing.

The churches said they plan to "show banks and payday lenders a fairer approach to finance".

Under the initiative, local churches are also being urged to link up with existing credit unions to offer a trusted and ethically-sound place for loans for families without high interest rates.

The Moderator will join the Archbishop and the President of the Methodist Conference, Rev Ken Howcroft in London at the launch of the flagship Churches Mutual Credit Union (CMCU).

The CMCU, which also includes the Scottish Episcopal Church, and the Church in Wales, will offer a range of savings and loan products.

The lenders say "fairness will be at the heart of the CMCU's values".

Initially members will be able to invest in the bonds with ordinary savers accounts and loans becoming available in March.CMCU will eventually also offer ISA savings accounts.

At least 60,000 people across the UK, mostly ordained ministers, elders, employees and trustees of churches and church charities are eligible to join, along with churches and Church of Scotland and Anglican charities.

Mr Chalmers said: "About 35,000 ministers, elders and workers in the Church of Scotland will be able to join the CMCU, with the intention of widening the membership in due course.

"Many of the most successful credit unions are, or were originally, employment based, and CMCU will ensure that many people in the community will have first-hand experience of a credit union and be able to pass the word on about the services they can provide."

The Church of Scotland established a comission in 2010 look into what had gone wrong with our economic system and to suggest how it might be improved.

Its principal was to establish how the Church could "best offer Scottish society a new vision of what might be achievable in the economic, social and community life of the nation".

The credit union movement was identified as being able to help deliver an ethical approach to finance.

Mr Chalmers added: "In collaboration with its partner churches, the Church of Scotland is working in the most practical and appropriate ways for the common good of society.

"It is through the development and support of new, co-operative and mutual projects like this that society can offer more in the way of financial inclusion.

"A new player in the marketplace will help to influence the financial services industry, and to put first the needs and consideration of all.

"The Church is perhaps uniquely placed as having a publicly accessible facility in every community in the country.

"Thus, in addition to helping to develop the CMCU, we have been encouraging congregations to form partnerships with their local credit unions, in order, for example, to allow the credit union to use the church hall as a 'branch office', perhaps on a weekly or monthly basis.

"This has allowed more people to access the services that credit unions offer, and has also raised the profile of the credit unions- resulting in more people joining."

Archbishop Justin said: "My congratulations go to all involved in establishing the Churches Mutual Credit Union as it is launched today.

"Credit unions have the potential to make a transformative contribution to our financial system and I am delighted that it will be possible for clergy, church employees and church trustees to belong to a credit union focused on supporting their particular financial needs.

"As the first supporter to sign CMCU's application to the regulator in 2013 I am looking forward to being one of the first to sign up as a member when registration opens tomorrow.

"It is a notable strength of CMCU that it brings together churches from England, Scotland and Wales in this shared venture."

Wonga has said it welcomes the competition.