Archbishop of Canterbury Justin Welby (Photo: Reuters)
Archbishop of Canterbury Justin Welby (Photo: Reuters)

The Church of England has admitted that its pension fund is linked to payday loan company Wonga, only a day after the Archbishop of Canterbury said that he wants to try and put that industry out of business.

Pensions for CoE clergy and other staff are placed in a fund which invests in US-based venture capital firm Accel Partners (AP).

AP was instrumental in leading fundraising efforts for Wonga in 2009.

On Thursday, Archbishop of Canterbury Justin Welby said he wanted to put payday lenders, which charge astronomical interest rates on short-term loans, out of business by creating a credit union.

However, the official residence of the Archbishop of Canterbury said it will now be looking to probe into how CoE pensions became affiliated with payday loan practices.

"We will be asking the Assets Committee of the Church Commissioners to investigate how this has occurred and to review the holding in this pooled investment vehicle," said a spokesperson for Lambeth Palace in a statement.

"We will also be requesting the Church Commissioners to investigate whether there are any other inconsistencies as normally all investment policies are reviewed by the Ethical Investment Advisory Group."

"We're Trying to Compete You Out of Existence"

Welby is very vocal on wanting to crack down on the payday lending sector, which is worth £2bn ($3bn, €2.3bn) in the UK. The sector in 2013 has doubled from that of 2008 to 2009.

Current figures show that this corresponds to between 7.4 and 8.2 million new loans.

Despite these loans being described as one-off short term loans, costing an average of £25 per £100 for 30 days, up to half of payday lenders' revenue comes from loans that last longer and cost more because they are rolled over or refinanced.

Interest rates on the short term loans can reach highly inflated levels. For example, one of the UK's largest payday loan companies, Wonga, bumped up its representative APR of 5,853% on its website this month.

According to Total Politics magazine, Welby met Wonga chief executive, Errol Damelin, and said "we're not in the business of trying to legislate you out of existence; we're trying to compete you out of existence."

Welby said he wants to forge a credit union for those in desperate need of bridging loans and launch a not-for-profit financial cooperative that offers deposit accounts and low-interest loans.

Wonga boss Damelin has welcomed Welby's assertion that the CoE would try to put the controversial payday lender out of business and insisted there was "mutual respect" between the pair.