How illegal loan sharks take advantage of households desperate for credit

For most people, turning to a loan shark is something you see in Guy Ritchie movies and gritty crime dramas.

However, for the masses across the country, illegal moneylenders have become the only way to cover their needs, from household bills to baby formula.

But borrowing money from a loan shark is risky, and many are willing to threaten violence or even death to obtain repayment.

According to a 2022 report from the Center for Social Justice, an estimated 1.08 million people nationwide applied for loans from illegal lenders.

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

As a result, the number of people turning to loan sharks could well have increased from 2022.

The Center for Social Justice told This is Money: “In the long shadow of high inflation, rising interest rates and skyrocketing food, fuel and energy bills, we have seen a growing reliance on credit cards and Buy Now, Pay Later, and household savings are reduced. and mortgage arrears increase.

“For the most vulnerable people and financially exposed households, the lure of neighborhood loan sharks must be almost irresistible despite the real dangers they present.”

Unsurprisingly, accurate and up-to-date figures on the number of people turning to illegal moneylenders are difficult to come by. Victims are often too afraid or ashamed to report their loans.

Of course, given the illegality of usury, lenders are not going to provide data on who has borrowed and what type of loan they have obtained.

However, with up to 2.8 million loans rejected in the last two years, according to the Joseph Rowntree Foundation, many people have likely had no choice but to turn to loan sharks to get 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 need to borrow, but for a variety of reasons some people “They just can’t access it or they can’t do it.” Don’t choose credit through mainstream channels.’

According to estimates by the Money and Pensions Service, more than nine million adults across the UK have been turned down for all types of credit except mortgages in one year alone.

Adam Butler, public policy manager at debt charity StepChange, told This is Money: “We are increasingly concerned about access to affordable and sustainable credit options for the most financially vulnerable, particularly in light of the continuing cost of living pressures that have impacted people’s finances. security.

‘A single, unexpected financial shock can push people with little or no financial resilience into a debt spiral, if they have no other options other than turning to high-cost credit or even loan sharks. Our recent survey revealed that one in eight people would not be able to cover an unexpected £1,000 expense without taking out a loan.’

Disturbingly, Dave Fishwick, founder of Burley Savings & Loans and inspiration for Netflix’s Bank of Dave, said a loan shark told him he sees himself as 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 with ITV’s Good Morning Britain, added that he has lent up to £100,000 to someone to pay off their mortgage. The lender then expected £150,000 to be paid six months later.

‘He says the only time the debt is canceled is if he dies and he said the third visit I made to someone is the last. It’s a very, very unpleasant job,” Fishwick told This is Money.

On the ground, Fishwick said he only sees the problem getting worse.

“Fifty-four banks close every month,” he said, “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 means 600 more opportunities for loan sharks to operate in that space.”

Since January 2015, this equates to the closure of 5,934 bank branches, according to Which?.

Compounding the problem is the shift towards cashless payments, even though millions of people still rely on cash payments.

“Some towns and villages don’t even have ATMs,” said Fishwick, “so when this guy is in the pub and has a few thousand pounds in his pocket and offers to lend it to him, there will be a certain amount of people who will think he’s the only option.’

“The fact that money is disappearing will increase the number of loan sharks because they are the ones who have pockets full of cash.” It is instantaneous and will be very tempting when there is no other alternative.”

What are the dangers?

Unlike a high street lender, a loan shark is not going to run a credit check, they certainly do not have a license, and in most cases, they are willing to go to great lengths to get the money they have been promised. . .

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

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

Unsurprisingly, a whopping 81 percent said they were experiencing extreme stress, worry or depression due to borrowing from a loan shark, and a third considered or attempted suicide.

Of these victims, the youngest was just 19, while the oldest was 91. Loans taken also varied widely, with the lowest being just £30 for household bills, but even this soared to a repayment of £480. by the borrower.

At the other end of the spectrum, one victim borrowed £99,000 but repaid £450 over a 25-year period.

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

‘[Illegal lenders] They target people when they are most vulnerable and often use deceptive tactics, pretending to be a friend doing a favor. Once they have people trapped, they will do everything they can to keep them there and bleed them dry,’ Quigley told This is Money.

‘In 2023, 17 percent of the people we support had borrowed more than 10 times. These illegal lenders trap them in a cycle of debt, they have to borrow more to pay off what they already owe and they feel like they will never be able to escape.’

Meanwhile, 14 per cent did 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 borrowing money, as loan sharks are often embedded in communities. A whopping 43 percent of victims believed they were friends at the time 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 most worryingly, 8 per cent met their loan shark online, suggesting criminals are taking full advantage of modern technology to expand their lending operations.

The friendly relationship that people often have with a loan shark, at least at the beginning of their loan, means they may be reluctant to report threats to the police. In other cases, victims are often too afraid to report threats for fear of the repercussions if they do.

However, Citizens Advice recommends calling the police immediately if any threat occurs, even if the lender is a friend or family member.

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

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

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

Similarly, those who suffer at the hands of loan sharks can report the lender to the Illegal Money Lending Team.

“As soon as they talk to us, we can help them begin the journey to escape the cycle of debt they are trapped in,” Quigley said.

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