Tackling loan sharks

‘Estimates suggest that 165,000 households in the UK are exploited by loan sharks every year with up to £40m lent and as much as £150m repaid annually.’ With Christmas approaching many are going to be tempted to overspend and loan sharks are always only too happy to take advantage of this.

To tackle the threat loan sharks present to many of the weakest communities a new nationwide scheme has been set up to help identify the culprits and protect the victims. The national project follows the success of pilot anti-loan shark teams in Birmingham and Glasgow, staffed by specialist trading standards officers working closely with the police.

Tackling loan sharks

Telling the difference between a loan shark and a licensed money lender can be difficult. Licensed lenders still have collecting agents that go door to door and probably have very high rates of interest, but this is completely legal.

According to me, we need to stop sharks, ‘loan sharks can appear like a friend in the community who is there to lend a hand and step in if say the washing machine breaks down for example. Loan sharks may be held in awe in their community, they can be very well known and are often referred by friends. They can also have a very good knowledge of the benefits system. They can have a vested interest in making sure that their clients are claiming everything so that they can cream some of that income off.’

Unlike licensed money lenders loan sharks operate outside the law

Unlike licensed money lenders loan sharks operate outside the law, their interest rates are usually even higher at extortionate rates and they often use intimidation or outright violence to reinforce their hold over their victims.

They explained that loan sharks usually have a specific type of victim in mind. ‘The people most at risk of loan sharks have a much lower than normal income, they may also have other problems such as mental health or drug and alcohol problems. They are often the most vulnerable and financially excluded people in the community, which is why the project is using a multi-agency approach.’

The most important part of the new project is getting victims themselves, or their friends and family, to come forward and make the new agency aware of the problem. Victims are often afraid to go to the police and yet heightened awareness and a media campaign over the Christmas period should change this. Loan sharking is illegal and there is no reason victims should let them get away with it.

Perils of loan sharks

I have once before mentioned the perils of so called ‘loan sharks’, although that was in the general terms available when other forms of credit were more plentiful. Now, with lending conditions worsening, government and debt charities alike a reissuing warnings to those who may be tempted to use extreme measures to secure credit.

The problem is that doorstep lenders and loan sharks are moving into the space left by Britain’s high street banks. The more banks tighten their terms for lending the more unofficial lenders rub their hands with glee.

Debt campaigners have seen hordes of clients forced to borrow at extortionate interest rates because they have had their credit cards cut off or have been refused loans as the country’s biggest banks react to the global liquidity crisis.

Banks have scrapped 125% mortgages, increased the minimum deposit needed for first-time mortgages and reduced credit card limits as the banks’ own borrowing costs rocketed in response to a worldwide collapse in inter-bank lending.

Last month Egg, the online lender, cancelled the credit cards of more than 160,000 customers. Many lenders, including Nationwide, Britain’s biggest building society, are charging higher rates for borrowers who do not have a 25 per cent deposit. At the same time, Provident Financial, the country’s most prominent doorstep lender, has predicted a booming 2019. The lender said this month that the number of people who fell into the ‘non-standard’ category of borrowers had grown to about ten million.

Difficult to get credit

The Financial Services Authority (FSA) estimates that up to seven million people have difficulty gaining mainstream credit, and Citizens Advice reported last week that mortgage arrears problems had shot up by 35% in the first two months of 2019, compared with the same period last year. Citizens Advice bureaux said that they had dealt with 215,000 new debt problems in January and February.

Doorstep lending, which usually involves small loans on interest rates of 100 per cent or more, with payments collected each week by a local agent, is legitimate, but debt charities fear that unauthorised lenders are also capitalising on the increased number of people who have found their usual lines of credit diminished or cut off.

The problem with this type of lending is that for those desperate for money no rational and reasonable advice will dissuade them from taking any opportunity available to get the cash into their hands as quickly as possible, no matter what the consequences. Awareness of the problem coupled with sensible legislation from government and support links from charities is the best way to deal with those who have got themselves into serious difficulties. If you have fallen victim to an extortionate lender, either legitimate or illegitimate, contact the Citizens Advice Bureau immediately.