PENSIONS chief Dudley Mead has promised to end the council's investment in payday loans firms.
The vow comes after it emerged that £60,943 of Croydon Council's pensions fund was indirectly invested in short-term credit company Wonga.
A further £15,377 is pumped into two other credit firms; Global Analytics Holdings (£11,751) and Kestrel Holdings (£3,626).
Labour called the investment "unethical" and called for the council to stop supporting companies which "exploit" people in financial difficulty.
In April, Cllr Mead, chairman of the Pensions Committee, rejected similar calls following criticism of its £2.1 million investment in the tobacco industry.
Speaking to the Advertiser this week, however, he admitted to feeling uncomfortable about the council's interest in firms which charge annual interest rates of up to 4,000 per cent.
"I share the view that the fund should not be invested in payday loans companies, in particular Wonga," he said.
"We will persuade the fund manager to extricate ourselves."
The council's pot is managed by Pantheon Europe Fund III which, Cllr Mead explained, chooses where to invest the money.
" I have to be careful about this. If we go on being too ethical, you won't have investments in armaments, you won't have tobacco, you won't have anything.
"But I think payday loans is going just that little bit too far. I think they are exploiting people in difficulty."
Labour councillor Mark Watson, who prompted the investment to be revealed via a Freedom of Information request, said: "Payday lenders are exploiting some of the poorest people in our constituencies. The only people who go to them are those who have run out of options.
"We have some control over the pension fund so we should be investing in things that bring benefit to the community.
"The argument Dudley puts forward, and I don't necessarily agree with it, is that it's profitable to invest in things like tobacco. I don't think that's the case for the payday loans firms.
"It's such a small amount that the argument wouldn't stand. We need to send a clear message that we, as a council, do not support an industry which seeks to exploit those who find themselves in difficult financial circumstances."
The money invested in Wonga represents around 0.01 per cent of the overall pension fund. Mr Mead said it could not be removed immediately.
"I see the fund manager once a year and I'm not due to see him again until April next year," he added.
"What I will be saying is that we are uncomfortable and we want him to, at the appropriate time, extricate us. But we can't rush. It doesn't operate like that."
Mr Mead added that he would not reconsider the council's support for the tobacco industry.
