How illegal loan sharks prey on households desperate for credit

For most people, going to a loan shark is something of Guy Ritchie movies and gritty crime dramas.

However, for the masses across the country, illegal money lenders have become the only way to afford their necessities, from household bills to baby food.

But borrowing money from a loan shark is risky, as many are willing to threaten violence or even death to get paid.

An estimated 1.08 million people across the country took out loans from illegal lenders, according to a 2022 report from the Center for Social Justice.

As the cost of living continues to spiral, more and more people are struggling to afford essential items and are looking for other ways to meet their payments and provide for their families.

As a result, the number of people using loan sharks may have increased since 2022.

The Center for Social Justice told This is Money: ‘In the long shadow of high inflation, interest rate rises and rising food, fuel and energy bills, we have seen a growing reliance on credit cards and Buy Now, Pay Later, while household savings to decrease. and mortgage debts are increasing.

‘For the most vulnerable individuals and financially vulnerable households, the lure of the neighborhood loan shark must be almost irresistible, despite the real dangers they pose.’

Accurate and up-to-date figures on the number of people using illegal lenders are, predictably, difficult to obtain. Victims are often too scared or ashamed to talk about their loans.

Given the illegality of predatory lending, lenders will obviously not provide data on who has borrowed and what type of loan they have taken out.

However, with as many as 2.8 million loans rejected in the past two years, according to the Joseph Rowntree Foundation, it is likely that many people have had no choice but to turn to loan sharks for the money they need to survive .

Tony Quigley, head of the Illegal Money Lending Team, which investigates and prosecutes loan sharks and supports borrowers, said: ‘People are struggling to make ends meet and they do need to borrow, but for a variety of reasons some people simply don’t have access to don’t choose credit through regular channels.’

According to estimates from the Money and Pensions Service, more than nine million adults in Britain have been turned down for all types of credit in one year, excluding mortgages.

Adam Butler, public policy manager at the charity StepChange, told This is Money: ‘We are increasingly concerned about access to affordable and sustainable credit options for the most financially vulnerable, especially in light of continued pressure on the cost of living that has affected people’s financial situation. security.

‘A single, unexpected financial shock can push people with little to no financial resilience into a debt spiral, when they have no choice but to turn to expensive credit or even loan sharks. Our recent research found that one in eight people would not be able to cover an unexpected £1,000 expense without borrowing.”

Disturbingly, Dave Fishwick, the founder of Burley Savings & Loans and inspiration for Netflix’s Bank of Dave, said a loan shark told him he considers himself an “essential service for people who can’t get help from a bank.”

The loan shark, who Fishwick spoke to as part of a campaign against illegal lending on ITV’s Good Morning Britain, added that he has lent as much as £100,000 to someone to pay off his mortgage. The lender then expected £150,000 to be paid six months later.

‘He says the debt is only written off when he’s dead, and he said the third visit I made to someone is the last. He is a very, very nasty piece of work,” Fishwick told This is Money.

Locally, Fishwick said he sees the problem only getting worse.

“Fifty-four banks close every month,” he said, “that’s one this morning and one this afternoon, every month, every day.

“By the end of this year there will be 600 fewer banks than there are now… that’s 600 more opportunities for loan sharks to operate in that area.”

According to Which? Since January 2015, this has amounted to the closure of 5,934 bank branches.

The problem is exacerbated by the shift to cashless payments, despite the fact that millions of people still rely on cash payments.

“Some towns and villages don’t even have an ATM,” said Fishwick, “so if this guy is sitting in the pub and he has a few thousand pounds in his pocket and he offers to lend it to you, there will be a certain number of people will think this is the only option.’

“The fact that money is disappearing will increase the number of loan sharks because they are the ones who have their pockets full of cash. It will happen immediately and it will be very tempting if there is no alternative.’

What are the dangers?

Unlike a major lender, a loan shark will not run a credit check, they are certainly not licensed and more often than not are not willing to put in serious effort to get the money they have been promised. .

Of the 780 victims helped by the Illegal Money Lending Team in 2023, the loan shark researcher said 31 percent of these victims were threatened with bodily harm or assaulted by a lender before reporting them to the team.

Nine percent of these victims said their lender proposed sexual services as in-kind payment for their loan.

Unsurprisingly, a whopping 81 percent said they experienced extreme stress, worry or depression because of borrowing from a loan shark, while a third considered or attempted suicide.

Of these victims, the youngest was only 19, while the oldest was 91. Loans taken out also vary widely, with the lowest being just £30 for household bills, but even this resulted in a £480 repayment by the borrower.

At the other end of the spectrum, a victim borrowed £99,000 but paid back £450 over 25 years.

Once victims miss a payment for the first time, they find their debts piling up and they become trapped in a cycle of ever-increasing debt, leaving them no choice but to borrow even more.

“(Illegal lenders) target people when they are most vulnerable and often use deceptive tactics, posing as a friend doing a favor. Once they get people on the hook, they will do whatever they can to keep them there and bleed them dry,” Quigley told This is Money.

‘In 2023, 17 percent of the people we supported had borrowed more than ten times. These illegal lenders trap them in a cycle of debt, they have to borrow more to pay back what they already owe and they feel like they can never escape it.”

Meanwhile, 14 percent could not remember how many times they had borrowed, and only a fifth had taken out just one loan.

Illusion of friendship

In many cases, victims of loan sharks do not realize or consider the risks of lending money because loan sharks are often embedded in communities. As many as 43 percent of victims thought they were friends when they first borrowed money.

In fact, the IMLT said that more than half of the victims it helped in 2023 met an illegal lender through friends or family, while 14 percent met them at work.

Perhaps more worryingly, 8 percent met their loan shark online, suggesting criminals are making the most of modern technology to boost their lending operations.

The friendly relationship people often have with a loan shark, at least at the beginning of their loan, may make them reluctant to report threats to the police. In other cases, victims are often too afraid to report threats, fearing the consequences if they do.

However, Citizen’s Advice recommends calling the police immediately if a threat is made, even if the lender is a friend or family member.

For those struggling with debt, Butler recommends seeking free advice.

“We would encourage anyone struggling with their finances and considering using credit to seek free and impartial debt advice from a reputable charity like StepChange,” he said.

‘Even if you are not currently in debt, we can provide free budget advice and help you identify available benefits that you may be eligible for but are not currently claiming.’

Likewise, those suffering at the hands of loan sharks can report the lender to the Illegal Money Lending Team.

“Once they talk to us, we can help them start the journey to escape the debt cycle they’re stuck in,” Quigley said.

Anyone who believes they have been targeted by a loan shark can contact Stop Loan Sharks’ 24-hour confidential helpline on 0300 555 2222, email reportaloanshark@stoploansharks.gov.uk or complete an online report form at www.stoploansharks.co.uk. Live chat is available on the website Monday to Friday from 9am to 5pm.